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.