President must involve commercial sector on a large scale

9 February 2021

President Ramaphosa will have to spell out the role of the commercial sector very clearly in his State-of-the-Nation address this week. He should also highlight the factors that undermine this sector’s contribution to the economy and the country’s progress in general.

This is the view of Christo van der Rheede, executive director of Agri SA.

“In his address last year, the president mentioned, among other things, that the country was facing serious problems. There has been no meaningful growth in the economy over the past decade,” says Van der Rheede. “Unemployment is growing. Continuous power shortages have disrupted businesses and people’s lives. Various state-owned enterprises (SOEs) are in trouble and South Africa’s public finances are under serious pressure.”

Some of the solutions as presented in his previous address focus, among others, on building a competent state, restoring the economy by focussing on critical areas and the right basic principles of growth and on excellence in planning and implementation by government. “The question remains whether any progress has been made in this regard. The answer is yes, there have been successes, but also no – there are areas where no progress has been made.”

According to Agri SA successes include progress made with the integrated resources plan and, among others, investment in the economy by international companies such as Ford, which intends to invest R14,8 billion. PepsiCo, which earlier this year bought Pioneer Foods, will invest R5,5 billion, while Telkom intends to invest R8 billion in infrastructure throughout the country. Google has confirmed that they will spend R2,2 billion to expand their optic internet connections across South Africa.

“This is good news and serves as confirmation that the president has succeeded in attracting international investment to South Africa,” says Van der Rheede.

He adds that there is an even bigger opportunity – that is, to heed the call of the commercial sector to address the factors that discourage large-scale local investment and involvement in the roll-out of commercial and development projects. “These factors include political stability, policy certainty, affordability and labour flexibility, as well as safety and security, property rights, competitiveness, and the state’s capacity to deliver services.”

Agri SA also warns against the uncertainty caused by the Expropriation Bill and proposed amendment of section 25 of the Constitution. Economic theory and history confirm that certainty in terms of property rights plays an important role in attracting investment, which in turn leads to economic growth and widespread prosperity in the long term. This also applies to other sectors. South Africa has over the past two decades developed a dubious reputation where, despite being rich in mineral resources, it is unable to benefit from rising commodity prices.

South Africa is its own worst enemy in this regard, says Van der Rheede. “Concerted action to restore policy and governance certainty in general, as well as a massive industrialisation effort, is urgently needed to eradicate poverty and facilitate sustainable development.”

The Auditor-General’s reports on the roll-out of Covid-19 initiatives by the state, the financial position of various SOEs and related projects, sketch a dismal picture of a lack of control, of mismanagement and corruption, as well as poor or non-existent implementation of projects. In this regard, the president will have to enforce comprehensive and practical measures to curb corruption and the unacceptable level of irregularities, address the lack of control and oversight, and non-compliance with regulations, and to hold officials accountable. Involve the commercial sector to also buy, distribute and administer Covid-19 vaccines. The state does not have sufficient capacity to roll it out successfully.

Agri SA believes that the president now again has an opportunity to involve the commercial sector on a large scale to drive sustainable economic growth, job creation and development. “This applies to all spheres of society, but the ball is in the president’s court to lay a firm foundation for such a partnership – to create an environment where the commercial sector is not hampered by all kinds of constraints, but can flourish and be of service to South Africa and all its people.”

Enquiries:

Christo van der Rheede Agri SA Executive Director