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!