Let the sleeping dogs lie: a case of Saudi Arabia

The 21st century is to be marked with a turn of socio-political and economic events that could spawn unprecedented economic revolution into the 22nd century with enormity and speed as twice as those seen during the Industrial Revolution. The rise of the developing countries like the grouping of the BRICS nations is just the end of the beginning and the tip of the economic revolution ice berg. Unlike in the late 19th and the early 20th century when only a few countries hurdled themselves out of the quagmire following cold wars, world wars, oil shocks and other calamities, the 21st century is breeding vast economies into a wealth of nations.

I depict this viewpoint from an inspiring piece of article i picked from the European edition of Financial Times today. Essentially, this article hoisted my nerve wracked with a little sense of jelousy when i think back that why is my country, South Africa, not moving with the same political will as this country. Notwithstanding, i was filled with a sense of pride that other countries are doing the best for their citizens and that instilled hope in me. The article by Michael Peel, reports that Saudi Arabia is investing $6bn to train professional elite. This investment was spent in a single fiscal year, 2011, on foreign study scholarships for almost 250,000 students and family members. The scholarship covers, not just tuition fees but also other items such as living allowances, medical insurance, and flights to and from home. The spend average about $25,000 a person this year. This is part of a huge public spending programme being rolled out amid turmoil in the wider Middle East. I draw inspiration from the Saudi's minister when he expressed that this education investment could help transform Saudi society by giving a needed boost to its cadres of engineers, lawyers, doctors and IT specialists. That is a socio-economic investment with depth. Coincidentally, just over a week ago, one of the global Italian industrial and enginnering company, Tenaris, presented to us, as part of my MBA Programme, the challenges it faced in setting up its business (manufacturing plant) in Saudi Arabia. Part of their challenge was the cultural "shock" of the Saudi Arabians when it comes to employment. And this is as recent as 2010. The first shock, apart from the challenge in language, which is Arabic, almost the entire workforce in Saudi Arabia is foreign and expats and secondly, no woman is working, that is the culture. There is a shockingly high level of skills shortage that Tenaris has to bring its own worforce across the globe.  Due to its strategic innovativeness and global competitiveness as a business, Tenaris, pioneered a few changes in the manner in which Saudi Arabia looks at itself in the context of globalisation, particualrly from business perspective. Tenaris was the first company in Saudi Arabia to higher a woman in its executive and the first to higherl local Saudi Arabians as a private entity in 2010.  

The most striking factor, that thrilled me was the expression by the finance minister, Ibrahim al-Assaf, that the wealth in Saudi Arabia, has been spread over the population on housing, welfare, free education, free health, scholarships outside for all citizens. He says the scholarship programme is aimed at correcting a past failure to focus "on the right skills and the right education". Some observers say the scholarship programme could influence the country's political direction when the students come back home. Indeed, economic theory suggests the the rise of economic growth and increment of political stability is attributable to the growth of the middle class and the welfare of the entire population. The programme runs alongside large investments in infrastructure and social benefits. Unemployment benefit payments of $533 a month are due to be implemented after the Islamic new year this week, and public sector workers have received a bonus equal to two months' salary.

While the reforms points to the promising nation, the case of Saudi Arabia is one that has been the subject of economists for centuries. The economy is state led and it faces other drains on its finances, such as its notoriously heavy domestic energy consumption. Subsidies keep petrol so cheap that residents can fill a small car for as little as $10. Saudi Arabia should pursue economic reforms that are sustainable and globally aligned to infuse flexible economic measures resilient to intermittent financial and economic shocks. Economists' analysis may have the essence of truth, by my personal verdict is out: the investment in education will sustain that nation!!!

Fostering economic growth through entrepreneurial development in the formal sector

In less than three years, South Africans will be celebrating the second decade of democracy. That year will be a fifth democratic elections and perceptively an election to be marked a new dispensation of democratic order since 1994. In the past decade and a half, government developed and arguably implemented various set of policies and strategies that aimed to rid the scourge of socio-economic ills created by apartheid regime. The advent of the democratic dispensation in 1994 marked the victory by the majority of the people in the republic manifested in the political power led by the African National Congress (ANC). It is an open secret, however, that the attainment of political power, to date, has not liberated the very same majority economically. Hence the infamous and quoted phrase that "political power without economic liberation is meaningless". As such, strategies and policies aimed to eradicate and eliminate poverty, inequality and unemployment  have been developed and attempts bandid upon to implement them. While progress is noted thus far with remarkable achievements in other developmental areas, government should not claim to have been successful. The marking of the 20 years into democracy should at most be considered as the accumulation of knowledge, experience, lessons learned and employment of trial and error.

The implementation of socio-economic policies that were developed in the past decade and a half have not helped to a level that is satisfactory to the majority of the citizens. I must hasten to state that South Africa is well respected globally for her knack to develop relatively sound policies, of course except education, and an attempt to be globally competitive in various areas. However, implementation has always been a challenge. This is manifested in various statistical sets. My speficic interest, for the purpose of my arguement, is job creation and entrepreneurial development. These two issues play a critical role in reducing unemployment and fostering economic growth.

The focus of government policies on entrepreneurial activity leaned more towards the aim of reducing unemployment at the expense of economic growth was a miss. Entrepreneurial development without economic growth as the end in mind is not sustainable. The sustainability of entrepreneurial activity is relatively ensured if there's growth in the economy. As a result, the extreme focus by government on the informal sector as a means to alleviate poverty was a good social plan, but not a grand plan to spawn economic growth and such a plan doesnt result in economic growth. The plan of alleviating poverty by encouraging everyone to be self employed is a fallacy. The fact is, not everyone who is unemployed and want to pursue self-employment route as a result of hunger can be a successful entrepreneur. Most people in the informal sector do it because they want to feed their families and not because they want to be entrepreneurs. Therefore, government should infuse these kinds of traders/ survivalist entrepreneurs as part of the social plan. After all, economics empirial studies have shown that economic growth partly results from a high consumption of national resources.

The emphasis from government on trade and business transformation policies should be the strengthening and support of small businesses in the formal sectors of the economy. My take thefore is that government should place emphasis on SME's and place the other M (Micro) in the social plan alongside social grants. This could be done in the form of subsidy or incentive to those who are going out of their comfort zone to survive instead of relying on grants which in the main results in entitlement mentality. Of course, elderly, disabled and other similar categries should be classified and exempt from such a plan. 

Entrepreneurial development at formal level does have an impact on economic growth which has a ripple effect of job creation. This focus on formal sector small businesses  would help to absorb the supposed informal traders into the main stream economy through labour-intensive activities by those already in the formal sector as a result of solid support , in every possible way, by government. One thing i am proud of is that South Africans are creative and have entrepreneurial spirit. It is the latter that we need to develop, encourage and embrace. Another biggest focus for government in terms of support should be innovation. South Africa is relatively a least country with annual patent fillings, let alone commercialisation thereof. Given the saturation of key industries on exports which are mainly dominated by mineral resources, exports of technological knowledge would be key in economic growth. This could also be a spinoff for new industries.

As an emerging entrepreneur and a servant at heart, i take solace on the renewed vigour by the government manifested in the development of econimic growth trajectory through Industrial Policy Action Plan, New Growth Path and the most recent National Development Plan. I hope the lessons learned in the past decade and a half will bear fruit for the next two decades.

The call for Economic Codesa

I was captivated by the article Allister Sparks delineated in his Business day Column: At home and abroad entitled “‘Economic Codesa’ may help SA span ideological divisions". He set forth a balanced view of what South Africans, particularly business and labour, needs to put into perspective when considering their relationship pact. His operative word in his views is “compromise” by both labour and business to craft a solution that would seek to benefit both the employers and the employees in the quest for better employment conditions, job creation, reasonable wages, and involvement of employees in the growth of the business among others. He belaboured the latter by citing an example of how local business leaders could emulate or learn from the Germany’s “social partnership” model, in which workers participate in how business decisions are made and have more of a share in the profits that accrue.

His (Allister Sparks) thrust of the article is that South Africa should consider the sequel of the political Codesa 1 & 2 in the form of Economic Codesa. He believes this ‘platform’ would deliver better results when both labour and business compromise.  While I agree with his views on the compromises that both business and labour should consider for a better South Africa economically, I differ with his views on Economic Codesa as a platform to achieve or steer towards equitable economic share. What his views lack to acknowledge is, the ‘economic negotiating power’ that business possesses as a result of ownership of means of production and capital. This economic negotiating power is in the hands of White South Africans and foreign investors. BEE was the best case scenario, in the spirit of reconciliation and building of a rainbow nation, considered by the Black majority led government. There’s no better platform on which White business was presented to compromise given the political history of this country. In my belief and at worse government short itself in the foot by structuring BEE to focus on percentages of all the elements of BBB EE Score cards. That was a “unilateral compromise of economic codesa” by the black majority led government at its best, if not worse. 17 years into democracy the majority still cry foul of land ownership. White capitalists and land owners ignore their nation-building blind-spots. There’s nothing that workers (labour) and poor people would put on the table to compromise. For example, a CEO gets a 60% salary increase when the company has performed poorly, yet the employees get less than 10%, yet after a battle littered with strikes. This is tantamount and akin to professional slavery in a democracy.

It’s unfortunate that the result of the current economic landscape is the foundation of our world-wide touted and praised transition to democracy. Aluta Continua!

Likely unintended consequences due to failure of cross-policy making and implementation

The announcement of the new fund to be accumulate from the 3% annual net profits of companies to contribute to SMMEs funding and development is a welcome move, but personally i have my reservations.

The move is good from an ideology (transformation) perspective. And of course, finally, thank you there's now implementation taking place. The 3% has been there, as stipulated in the BBB EE Act and Code of Good Practice. It is not necessarily a new thinking, but an implementation mechanism (in a form of fund). This could have been done some few years back when the BEE regulations were enacted. My, perhaps, trillion rand question, is that why should government (ANC) always 'enter' this soft when the corporate jungle is so thick to 'penetrate'. For me the accumulation of the fund is unsustainable as a result of it appearing to be a 'choice' for corporates to comply. This thing (3% from profits for ED), first and foremost is legislated. Therefore it should not be a choice. It must be compulsory to all categorised companies with an incentive to get more BBB EEpoints. This view of mine is informed by at least the media reports. Hopefully there's more meat into it in the main document/ strategy/plan. As it stands, it looks like a choice because of a dangling carrot or the 'the low haging fruit' given to companies that they'll be awarded BBB EE scores when contributing to the fund.

The consumer driven industries are worth billions of rands annually and growing. Retail and FMCG are but two industies i can think of as examples. They dont need any BBB EE scorecard to generate billions of rands and profits for their investors. Do you think companies operating in this industries are going to contribute to this fund willingly? I know a company that generates over R5b in net profit per annum. This means it has to contribute over R150m per annum to this fund. This company is so untransformed that if the labour department and its inspectors are doing its job properly, it would fork out not less than R50m as a fine for not complying with the Commission for Employment Equity's annual EE reports submission if the EE Act (under review) provisions imposed on non-compliant companies were to be applied. That would eat heavily on their bottom line. Guaranteed, business will fight against the EE Act review of a 10% fine if this fund is to be puched hard by the government. Of course it will because there is pressure to create jobs. My suspicion is that the 'hype' of achieveing the 5m employment goal in five years will compromise the implementatin and enforcement of EE regulations compliance. So, government needs to place a watchful eye there. This fund will most probably be a best case scenario of choosing between EE compliance and ED compliance. This would point to the impact of  government's failure to thoughfully develop effective cross-policy  making. As we all know and are well-know to be doing, developing cross-cutting policies but failing to implement, this is such suspect of not winning it when it comes to implementation. 

De ja vu of colonial economic boom

Since World War I  through to the Cold War between West and the East, Africa, especially Southern Africa has always, through its natural endowment of minerals, been strategically positioned to counteract the economic crisis and political conflicts as has been experienced during the financial crisis that set in 2008. The South African gold boom, which was triggered off in 1933, made it possible for the country not only to counteract the effects of the world economic crisis but also to stimulate the restructuring of the economy by promoting the expansion of the industrial sector in the towns. The euphoria of post-war reconstruction is tantamount to the euphoria of post-economic crisis of 2008 by the West, North and the East. During post-war Africa was the enemy, a play ground and source of wealth for imperialists. There are no militant and armed wars in this era, but the structural 'wars' of economics. Now, Africa is the panacea. In the 1930's the restructuring and reconstructuring was employed for the benefit of the settlers and the colonialists.

In the 21st century the reconstrunction is disguised in the form of institutionalised globalism with pacts formed to ease trade among the world's regions and sub regions. And gues what, Africa is the target for growth. Now, all the developed countries in the world are looking to Africa for their own growth, China being the first in line. If as Africans we are not awake, we will point far at a distance, a slipped economic opportunity in the hands of the Asians, Americans and Europenas much as we let slipped the socio-economic-political power when Europeans settled on our mother land. Economic colonialism is looming. Wake up Africa! Tsoga moAfrica! The wisdom of our political and business leaders is on trial.

AN IDIOMATIC SEQUEL TO MINE NATIONALISATION

As a perceptive, discerning and active youth in South Africa on the socio-economic facet, I took liberty to read and re-read the recent document issued by the ANC YL entitled “A clarion call to economic freedom fighters: programme of action for economic freedom in our lifetime”. Indeed a programme of action that is underpinned by the Freedom Charter. For the purpose of expressing my opinion I call it a “Clarion Call”, a shortened version. Basically, in the English grammar, a “clarion call” is an idiom, meaning; a strongly expressed demand for action.

While it is laudable for the energetic ANC YL to have expended its energy to develop the paper and in the spirit of the constitutional tenet of freedom of speech and expression, I am dissuaded by the currency and materiality of its content, let alone a few grammatical errors which the writers of the ANC YL public documents need to austerely consider given its inherent consistency which has become a tendency that is likely to reflect an unprofessional  image on the part of the youth organisation with consequent public disregard.  I need to be taken seriously as a major constituent of the ANC YL in my attempt to make this country a better one during our lifetime and future generations. My first carp about the content of the Clarion Call is that it contains policy expressions that are not new to the debate of socio-economic growth in South Africa as a developmental state. This begs the question of its potential impact and the influence of socio-economic policy debates. The recital of, for example, unemployment figures, youth unemployment, poverty and income inequality is in the public knowledge and these issues have found their expressions in over a dozen of socio-economic policy documents by both the ANC and the government. Their lack of delivery has been the subject community protests. These issues have found their profound expression in the New Growth Part (NGP) policy document released by the Department of Economic Development in the last quarter of 2010. The original IPAP,IPAP2 and the IPAP2 2011-2013 contain these critical issues with industrialisation, job creation and poverty alleviation as key pillars to drive economic growth. President Zuma has in numerous occasions articulated his vision of integrated African continent through the development of infrastructure across the regional economic blocs. In actual fact, he is the champion of this critical goal in the AU. 

Out of the seven (7) “cardinal pillars of economic freedom in our lifetime” as expressed in the document, only one, i.e. “inclusive and decentralised economic growth and development” with specific reference to clause 22 about rural development that I would say is a new policy proposal by ANC YL that warrants attention by the mother body. For me, the rest of the document is a “sequel” of the mine nationalisation document released by the organisation in August 2010 idiomatically expressed through the reference from the Freedom Charter.

The principle for my argument is the logical purpose, amidst political rhetoric, of releasing, let alone developing such a document. I maintain that the raison d'être of influencing a debate is to steer it to a particular direction with an intended reasonable and practical outcome. Let me qualify my statement. In the Clarion Call, under the Industrialisation for Nationalisation cardinal pillar, the benefits of nationalising of strategic sectors of the economy are well articulated, with five examples mentioned. I have a problem with all five realities which in essence purport the government as the owner of economic activity and thus the largest and chief employer in the drive to economic growth. In my limited knowledge of economics and government administration, such a reality, would create a cumbersome government machine bedevilled with bureaucracy, red-tape with consequent enormous bill culminating into wearisome fiscus with the potential of stifling private economic activity. While the argument of land ownership holds water for a true economy that is transformed, history indicates that economies that have developed over time drove their economic growth through the burgeoning middle class and entrepreneurship with the latter fuelling employment and thus increasing the tax base for government to be able to deliver. The platitude of communities creating wealth by means of “profiteering” through broad-based empowerment schemes which are very long term in their nature is implausible.

Generally there is consensus that the government (ruling party), in the main, has developed policies that are progressive and to a certain extend world-class, the progress and advancement which the ANC YL embraces, acknowledges and recognises in the Clarion Call. However, the challenge for the ruling party (government) has always been in the effective implementation of those policies.

To this effect, I suspect, and I hope I am not right, that the ANC YL find it very difficult to balance its policy stances and development thereof, of national issues and those pertaining and concerning the youth of this country. It takes me back to my argument of logic and common sense I earlier referred to. For me the Clarion Call should have contained specific economic issues that are appropriate to the youth of this country. Therefore, the purpose of Clarion Call should have been the influence of the content to the constituency to ensure that all these ‘specific’ and ‘appropriate’ issues find their expression in all socio-economic policies. I put the adjectives specific and appropriate in parenthesis to emphasis the preciseness and defined vital socio-economic issues affecting the youth. Ours would be to mobilise the youth of this country to rally behind the intended outcome that speaks to us in our different professions and careers as well the future generation. The interspersion of such clearly articulated issues would find their appearance in the relevant and key economic policies.  After all and for the foreseeable future, the majority of South Africa’s unemployed population would be youth given the demographic landscape and profile of the total population. Actually, the problem of youth unemployment is not unique to South Africa, is a global issue. In South Africa youth unemployment has been the subject of ANC YL debate dating back in the mid 90’s, 1996 to be specific, while Malusi Gigaba, now the Minister of Public Enterprises was then its President. Julius Malema has indeed raised the profile of the organisation and represented the voice of youth with robustness filled with vigour and dynamism. Has he delivered according to the expectation of the constituency? Members as they head to Mangaung in a few weeks will decide.

Exploding dynamite found in the Department of Public Enterprises

Dynamites come in small packages. It sounds like a truism, but this old adage hold truth in the Minister of Public Enterprises, Mr. Malusi Gigaba. I had an opportunity to listen, attentively so, and engage with the minister at a recent BMF evening discussion forum organised by the Tshwane branch held on the 28^th March. I may sound like I'm blowing the minister’s trumpet. I am invoked and inspired by his enthusiasm to serve the nation in a manner that is worth writing about. Unfortunately, there was no media present during that night to capture the thought and the essence of this young and bright minister. The evening was organised in a different way as the minister was not expected to deliver any speech. A set of questions were predetermined by BMF members for the minister. His response to the questions meant that he had to present his answers in a manner equivalent to a speech. He was concise, profound and thorough in his response. His context to the questions gave a sense of a servant that understands the call for a public duty with specific reference to his own responsibility.

His theme to the questions asked addressed major quandaries facing, not only South Africa, but the entire continent of Africa. There were a few questions that he answered and a few comments or suggestions that were presented to him. The two questions that stood out for me and struck a nerve, related firstly, to the programmes that government, particularly his department, is developing and driving to develop youth with the aim to create jobs and secondly, aligned to the first question, the role State Owned Enterprises (SOEs) is playing in a developmental state with specific reference to transformation, skills development and job creation particularly the youth given its highest unemployment rate as it were. In his opening remarks as he was preparing to respond to the questions as asked, he quipped to the mirth of the audience. “I am not an economist, but just a hard-worker who requires the support of professionals like you” quipped the minister, meaning BMF members and society at large. His response to the first question was filled with the depth of what it means to be a responsible society in an economic revolution. He maintained, throughout his presentation of answers that the youth and young professionals should not only look to what the state or government should do for them, but what they should do for the society when the state has given them a platform for development and dialogue. He was emphatic on professionals being the true role models of the younger generation for the betterment of their future and that of the society.

He was critical of the role modelling through materialistic display such as “sushi culture”. He challenged the middle class and the young professionals to be true role models and plough back to the communities on which they were born and raised, mainly because most of them came to Gauteng as a result of employment. He was unequivocal about the role he plays in his area of birth by regenerating the village, which has become peri-urban, by harnessing the efforts and galvanising support of young professional and middle class that were born and raised in the area. For me this was a display, from the minister, of leading by example. He took a snap on the lack of policy implementation and speedy service delivery. His lucid example was the fact that youth unemployment was way higher than any segment of society by 1996. But it took service delivery protests two years ago and burning of tires by communities that all of a sudden there’s a wake-up call to make noise about the high unemployment rate amongst the youth. My observation is that the minister if passionate about the youth given his background. I suspect, I may be wrong, that he stills feels young, perhaps not by age, but at heart. To recall, indeed he is right about this and to consider at the time that he was an active “young lion” during that period, perhaps not as abrasive as the current “young lions” inspired by sushi. What enthused me was his emphasis on, again, not displaying a political rhetoric, but offering a solution that his department would do to assist and contribute to the society by alleviating the challenges as he outlined, especially those of youth unemployment and lack of skills. His logical  and eloquent answer is found in his respond to the second question of the role that State Owned Enterprises (SOEs) is playing in a developmental state with specific reference to transformation, skills development and job creation.

Once again, his answer to this question was clear with measurable outcomes and absent of a political rhetoric and quagmire. His profound answer was that all SOE’s especially those with a huge capital programme like Transnet and Eskom must ensure that in spending their infrastructure programmes, there must be opportunities for local development of industries and manufacturing through a competitive supplier development programmes (CSDP). There must be job creation out of all infrastructure programme undertaken by these SOE’s. How is he going to monitor this? In his four months leading the Public Enterprise Portfolio, he has met the Chairmen of all SOE’s. The content of these meetings comprises accountability by the Chairmen of SOE as to how much job they have created through the capital infrastructure programmes and how much of these jobs were created for youth. To this effect his department is to collaborate with the Department of Higher Education on a programme that would seek to develop students from EFT’s and Universities through artisanship in SOEs. We will watch the space to see and hear developments on this one. Also, the minister will be asking the Chairmen of SOEs what skills development programmes are in place by SOE’s to ensure that by the time the infrastructure programmes are complete, the skills gaps is narrower if not  closed. These are among other key strategic issues that the Minister will be tackling in his quarterly meetings with the Chairmen of the SOEs. This instils confidence in the society in the minister who has a knack of grasping the role of his portfolio enterprises and craft a clear monitoring and evaluating system of measuring the performance against the policies of the ruling party (government) and not of his own.

His other profound response, as I conclude, was his resounding thought and vision about the role that South Africa, through his department (SOEs) in particular, should play in developing the South-North corridor from an infrastructure perspective. “...South Africa will not grow its economy with the 49 million citizens while the rest of Africa is underdeveloped...” emphasised the minister. For South Africa to realize its potential to grow the economy, it has to play a big role in assisting other African countries to develop its infrastructure, particularly SADC and other regional blocks in the continent. Clearly, his drive for this goal is derived from the President’s goal of developing Africa as a key emerging market for the benefit of our own country. His articulation and expression of passion about the development of this country and the continent make him a servant of note. His peers have a difficult act to follow. I hope that the bureaucratic system will not derail him and stifle his thought leadership and passion to serve the nation in a meticulous and tireless manner. After all he may not be an economist, but for me he thinks line one. That makes him one. All the best to Minister Gigaba and his handful team, yet facing a mountain challenge.