South Africa's Radical Economic Transformation: Beyond Sloganeering

By Nosihle Shelembe

One of the key features of the 2017 State of the Nation Address (SONA) has no doubt been the government’s intended stance to “radically” transform the economy and ensure equitable share of the country’s wealth.

More than 22 years after South Africa attained its democracy, it has become clear that economic exclusion remains a stubborn reality despite two decades of political change. Changing the face of the South African economy, which has benefited a few for decades if not centuries, was not going to be easy to achieve in a space of 22 years.

Observers say unlike in Asian countries like India and China and indeed the Americas where common goals produced change and growth, South Africa’s systematic racial divisions persistently make it difficult for government and business to share common goals here.

Evidently though, as indicated by President Jacob Zuma in the SONA in February, the South African government is growing impatient with the slow pace of economic transformation, a tragic phenomenon that has left the majority of black people trapped in a mud of poverty and economically disempowered.

While strides have been made in the past to ensure the inclusion of black people in the economy through policies such as the Black Economic Empowerment as well as Broad-based Black Economic Empowerment, clearly more needs to be done, says the government.

“Political freedom alone is incomplete without economic emancipation,” President Zuma declared in February. But how will the government go about tackling these inequalities that are so entrenched in the South African economy? Radical economic transformation and redistribution will require the country growth to be higher than what it is now.

President Zuma has said government has already begun to lay the ground work to accelerate the pace of transformation in the economy with various programmes.

Merging key financial institutions

Not long after the SONA, his Ministers of Trade and Industry as well as Economic Development hit the ground running, announcing a merger between the National Empowerment Fund (NEF) and the Industrial Development Corporation (IDC). This is significant.

The merger will go a long way in meeting the considerable demand for funding by black entrepreneurs which the quest to deliver radical socio-economic transformation and produce black industrialists.

Merging the two institutions, which both control billions of rands in funding, was a direct response to President Zuma’s stance that fundamental change was needed in the structure, systems, institutions and patterns of ownership, management and control of the economy.

Both the IDC and the NEF have been identified by government as central in implementing radical economic transformation and development policies, particularly in light of renewed efforts to develop black industrialists.

The decision for the merger is in line with government policy to consolidate South Africa’s development finance institutions to provide effective support to emerging and existing black entrepreneurs, and thereby enhancing efficient service delivery.

Government’s plans to radically transform the economy are also in line with the priorities of the Nine Point Plan, which was announced by the President during his 2015 SONA. The plan is aimed at boosting economic growth and job creation.

Revitalising agriculture and the agro-processing value chain

As advanced by many analysts and economists, economic transformation and redistribution in South Africa will require growth. Growth can only be achieved by supporting sectors that promote fast economic growth. These sectors include agriculture, manufacturing, tourism, mining and the automotive industry, among others.

Through the Nine-Point Plan, government has directed economic cluster ministers to transform the agricultural sector through the roll-out of Agri-parks in 44 districts, fast-track the implementation of the Strengthening Relative Rights of People Working the Land (50/50) Policy at 10 pilot sites and create jobs through the production of key commodities.

The cluster has declared that many of the initiatives planned in 2015 are at an advanced stage of implementation. The following has been achieved over the last two years:

· The construction of 11 Agri-hubs and 12 Farmer Production Support units is underway. The Ncora, Springbokpan and Westonaria Agri-hubs are now operational.

· Of the 66 proposals received under the 50/50 policy framework, 13 of them amounting to 90 191 hectares (ha) worth R631 million, have been finalised. These will benefit 921 households.

· The One Household, One Hectare Programme approved 154 sites which will benefit 6 000 households.

· R1 billion has been invested to recapitalise 611 farms, thus cultivating 526 452 ha of land that would be lying fallow.

· R1 billion has been invested to recapitalise 611 farms, thus cultivating 526 452 ha of land that would be lying fallow.

· Ninety black commercial farmers will be supported through the Commercialisation Support Programme, which targets 450 black smallholder farmers by 2022.

Implementing a higher impact industrial policy action plan

Industrialisation is another important element in growing the South African economy to ensure redistribution and transformation. To this end, government has achieved a number of milestones in driving the country’s industrialisation, in line with the Nine point Plan. Some of the achievements include:

· The Black Industrialists Programme which has supported 27 entrepreneurs, leveraged R2,5 billion in private sector investment and created 5 235 direct jobs.

· In 2016 the automotive sector for the first time exported R150 billion and received the country’s largest investment of R11 billion from the Beijing Automobile International Corporation. Construction on this project in underway and production is expected to commence in 2018. More than R20 billion in industrial finance was approved last year, creating 27 000 direct new jobs and approximately 108 000 indirect new jobs.

· More than R180 million was committed to upgrade six industrial parks across five provinces. In April 2017, the first phase of the revitalisation of Babelegi (Hammanskraal) and Vulindlela (Mthatha) industrial parks will be launched.

· Twenty-one (21) products have been designated for local production, including rail rolling stock, bus bodies, electrical transformers and transmission lines, fire trucks, boats, solar photovoltaic components and electricity meters.

Growing the oceans economy and tourism

The Nine-Point Plan sets out targets for the ocean economy, in the development of infrastructure to service the oil and gas industry, ship and boat building and aquaculture.

Successes that has been recorded in the work done in the oceans economy since 2015 include:

· Infrastructure investment in the country’s ports, which reached R2.76 billion. It includes the commissioning of a new 90-ton boat hoist in the Port of Port Elizabeth and dry-dock in the Port of Durban.

· The manufacturing and boatbuilding industry unlocked R2.8 billion in private-sector investment. The locally manufactured tugboat the Mvezo was unveiled in Port Elizabeth.

· The National Skills Fund (NSF) allocated R295 million for the South African International Maritime Institute at the Nelson Mandela University.

· Coastal universities, Technical and Vocational Education and Training colleges and two new high schools have introduced new qualifications that will support the oceans economy.

· Aquaculture attracted R444 million in private and public sector investment that has created 1 770 jobs.

Unlocking the potential of SMMEs, cooperatives, township and rural enterprises

Small businesses are a focal area in the Nine-Point Plan which targets removing regulatory constraints, assists through 30% of state procurement and the development of a framework to strengthen and regulate the informal business sector.

Good progress has been made over the last 24 months to meet these targets. They include:

· Amended Preferential Procurement Policy Framework Act regulations, which provide for 30% set-asides for Small, Medium and Micro-sized Enterprises (SMMEs) and cooperatives, are in place.

· Black Business Supplier Development Programme, which assists black businesses with their integration into the value chains and supplier databases of large corporations.

· National Gazelle’s programme, which targets 40 high-performing SMMEs with financial and non-financial support to accelerate their growth.

· Department of Small Business Development, which has dedicated 50% of its support to township enterprises and 30% to rural enterprises.

· Pilot Informal Trader Upliftment Programme, which has benefited 1 000 informal traders and the number is projected exceed 4 000 at the end of the 2016/17 financial year.

· Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency, which have co-located their services in 35 sites to allow a single-point access to services.

· Partnership between the NSF and SEDA to the value of R84 million, of which R35.3 million has been paid to date to develop the capacity of small businesses nationwide.

· Process of consultation to amend the National Small Business Act, 1996 (Act 102 of 1996), which has commenced.

While all of these programmes and achievements will not drastically change the status quo in the South African economy and its decades-long skewed structure, there is no doubt that a combination of a set of interventions, supported by policy, legislation and partnerships between government and the private sector, may gradually give meaning to the radical economic transformation beyond sloganeering.

- SAnews.gov.za