Small Players Need Share of Big Billions
Updated: Apr 29, 2019
Like most business people, I tend to listen to the state of the nation address with a psychological searchlight for clues of where our economy could be going for the year.
When President Cyril Ramaphosa addressed the nation this week, it was very clear that the man is all about the economy.
"While there is a broad range of critical work being done across government, this evening I want to address the five most urgent tasks at this moment in our history. These are tasks that will underpin everything that we do this year. Firstly, we must accelerate inclusive economic growth and create jobs," opened Ramaphosa.
This is probably the single most important attribute of the Ramaphosa presidency, and one that we must leverage in every way possible. The man just knows what to say and how to say it.
I was struck by the constant reference to key priorities along with timelines on most of the president's plans - the target to be in the top 50 in the next three years in the World Bank's ranking of the countries easiest to do business in; the target of R1.2-trillion in investments over five years, and many more.
All these instil much-needed confidence in our economic story.
Rightfully so, the president also read out his own report card when he reminded us that his investment conference last year has attracted around R300bn in investment pledges from South African and international companies, and the official numbers confirm the progress made.
"There was also a significant increase in foreign direct investment last year. In 2017, we recorded an inflow of foreign direct investment amounting to R17bn. Official data shows that just in the first three quarters of 2018 there was an inflow of R70bn. This is a phenomenal achievement compared to the low level of investment in the previous years," Ramaphosa added.
While I totally understand that Sona is no place to provide details of how exactly certain initiatives would be implemented, I did, however, think that Thuma Mina missed an opportunity to link his pursuit of "inclusive economic growth" with exactly how the marginalised will participate and benefit from investments secured.
We need to be careful not to relegate the concept of economic inclusivity only to empowering micro-businesses and creating semi-skilled labour.
Yes, that is important, but it is also important that we leverage these investment billions to help the smaller economic players of today to be the big companies of tomorrow, and in that way create a more competitive economy.
"It has long been recognised that one of the constraints that inhibit the growth of our economy is the high level of economic concentration. The structure of our economy was designed to keep assets in a few hands. This has stifled growth and enterprise and has to a large extent kept many young South African entrepreneurs and small enterprises out of the economy or confined them to the margins."
While I admire the initiative to create more regulation around competition, laws alone, especially in light of our constitution, aren't going to break up conglomerates that use market strength to make it impossible for smaller players to compete.
The problem isn't the law. The issue is that the big boys play only with other big boys.
The government has a unique opportunity to use its leverage by compelling or incentivising the investments secured to carve out opportunities specifically for small businesses.
The aspiration of all entrepreneurs is to grow. It would be quite a game-changer if the government could chart forums and ways for small and medium-sized businesses to interact with new investors and the projects they are pursuing.
Many of the businesses are likely to understand local conditions better than most foreign investors and can play a key role in engaging communities and managing all sorts of project risks.
According to Ramaphosa, projects to the value of R187bn are already being implemented, while another R26bn is in the pre-implementation phase.
It would be useful if South Africans knew how they could directly participate in these billions, rather than wait in the hope that somewhere down the line these numbers may somehow mean something to them.
This article first appeared in The Business Times, Sunday Times on Sunday, 10 February 2019