As a country, South Africa is facing significant economic challenges. We need to accelerate the growth rate to create wealth that enhances the standard of living for all South Africans, dramatically increase employment creation; develop industrial capabilities to decrease our dependence on commodity exports; and transform the ownership and management profile of the economy to reflect that of the broader South African population.
A range of policies have been developed that demonstrate the commitment of the South African government to overcome these challenges, namely the Industrial Policy Action Plan, the New Growth Path and the Performance Evaluation Framework.
The DPE is tasked with the vital responsibility of providing shareholder oversight and leadership to nine State Owned Enterprises. SOE are strategic instruments of Industrial Policy and core players in the New Growth Path. The question is how we can direct them to optimise their impact.
Infrastructure related SOE in particular, like Transnet and Eskom are in a powerful position to drive growth in the economy. Key sectors of the economy are completely dependent on the availability of infrastructure capacity for their existence and growth. For example, a large scale export orientated iron ore mining organization, located in the hinterland, cannot exist, let alone compete without a very efficient logistics link with the port. A foundry or smelter cannot be established without guarantee of supply and competitively priced electricity. A locomotive manufacturer on the Southern tip of Africa cannot survive if the national rail company is not consistently buying and maintaining locomotives.
As a result, SOE either constrain growth or they act as a catalyst for additional investment in these sectors. Therefore, we cannot see them in isolation from the impact they have on their customers and suppliers. Given their strategic position, SOE can play a leadership role in driving programmes that catalyse socio-economic transformation. Together with the private sector, they are pivotal in repositioning the economy onto a higher growth path, central to which is the overriding priority of job creation and poverty alleviation.
Consequently, the new vision for the Department is to drive investment, efficiencies and transformation in its portfolio of State Owned Enterprises, their customers and their suppliers to unlock growth, create jobs and develop skills.
To achieve the high levels of growth implicit in this vision, we need to plan for high levels of growth. This means that we have to understand what will unlock our SOE customers growth potential. We need to understand how we can tie SOE investment to new investment by customer sectors and leverage this investment to develop our manufacturing sector.
Historically, we have planned investments around what the SOE balance sheets could afford, but we need to look beyond the balance sheets to what our economy really needs to meet our growth aspirations. In the past, we invested based on what made sense to the enterprise (SOE), but now we need to look at what will yield the best returns for society and our people. Consequently, we have a vision that recognizes the intrinsic link between the investment of SOE and the growth of the SOE customers and suppliers. We need a planning paradigm that is not restricted to narrow balance sheets but one that is based on optimizing the overall impact of the SOE on the economy and society at large.
For these plans to be meaningful, we cannot be restricted by the funding capacity of the SOE balance sheets. We need to view funding of infrastructure as a national task and therefore need to look at new sources of funding. We are presently designing funding approaches and instruments that will involve our major customers and the financial services sector, without compromising Government’s strategic control of infrastructure assets.
In implementing the investment programmes, we need to build on progress in the Competitive Supplier Development Programme to entrench procurement leverage in the fabric of our SOE. SOE need to move from short term ad-hoc relationships with suppliers to long term strategic partnerships so that they build Centres of Excellence that will, over time, export to a regional and global market. Our fleet procurement process will establish this foundation for industrial development. We are working closely with the dti and Department of Economic Developemnt to ensure suppliers get adequate support to respond coherently to our demand signals.
We are also working with the Department of Higher Education to access additional resources so that we optimise the use of SOE training facilities. Our target is to provide technical and artisanal skills for a growing economy, not just to meet SOE requirements.
Finally, it is recognised that in certain areas, SOE are not as operationally efficient as they should be. The Minister has regular meetings with the CEO’s of our SOE to ensure that initiatives are put in place to effect operational improvements.
It is critical to appreciate that government needs to build a holistic and pragmatic partnership with business if we are to achieve our objectives – government cannot go it alone. What is apparent is our present situation of high unemployment and an extremely skewed income distribution is unsustainable. Many private sector business leaders know there is a problem – that business cannot flourish in a politically and socially unstable context. They recognise that unless business contributes to employment creation and economic development in a more concerted manner, there will be no future for their enterprises. Recently, at least one business leader recognised that while business is complaining about the environment, business is not putting forward alternative solutions that will address stakeholder concerns around their developmental impact. I think part of the problem may be that even well intentioned business leaders are at a loss as to how to develop an alternative approach.
I believe that the DPE and its portfolio of SOC can start to play an active role in guiding business in the development of practical solutions. Certain State Owned Enterprises in South Africa have some of the most sophisticated organisational and delivery capabilities in the state. They are tasked with under-taking investments and sustaining operations that are unique in scale and complexity within South Africa. And on top of this, I am proud to say the SOE are leading the way in developing methodologies to optimise the developmental impact of their activities.
By virtues of their strategic position and capabilities, through the leadership of the Department, the SOC are in a unique position to convene “coalitions of stakeholders” and to drive implementation processes in a way that is protected from the “dilutionary pressures” associated with accessing resources and driving implementation through the broader state. The building of these issue focused “developmental coalitions” through leveraging SOE will be the key mechanism of achieving alignment across key stakeholder groups. This alignment will involve agreement around the definition of an intervention, raising the required resources for the intervention and driving and monitoring implementation. Most importantly, we will be guiding the private sector’s investment plans and business practices towards those areas that will have a significant impact on our developmental objectives, particularly around building the productive and employment absorbing sectors of the economy.
There are a range of strategic and tactical developmental interventions around which these stakeholder coalitions can be formed. These include:
- increasing infrastructure capacity, efficiency and access,
- developing scarce and critical skills,
- the expansion of our industrial and technological capacity and capabilities. particularly in the supply chains that are core to the delivery of infrastructure, mining and resource processing activities.
- regional infrastructure and economic integration
Hence, over the coming months we have the objective of leveraging the strategic position of SOE to build multi-stakeholder development coalitions focused on the implementation of interventions that will have a tangible impact on the structure of South Africa’s socio-economic landscape. We need to practically align the private sector behind our development priorities.
It is in this context that we welcome this conference on African entrepreneurship. We need entrepreneurs who can build long term partnerships with government around the building the productive capabilities of South Africa’s economy. We need entrepreneurs who recognise that business needs to partner government in developing pragmatic and innovative solutions to the socio-economic challenges facing the country. We need entrepreneurs who can provide leadership to the broader business community to bring them on board a concrete program of economic growth and transformation. We need business people who are open to developing an African model of entrepreneurship that goes beyond a narrow enterprise view of business responsibility. I look forward to our engagement and wish you luck in your deliberations. |
