President Cyril Ramaphosa denied that South Africa must choose between a ‘developmental state’ and an expanding private sector that drives growth and employment. Writing in his weekly open letter to the public, he said the country needed both a state that plays a vital role in economic and social transformation and an agile private sector. They needed to work together and complement each other.
The idea, he said, was not new. The ‘Ready to Govern’ document adopted by the African National Congress in 1992 had envisaged a democratic state with ultimate responsibility for ‘coordinating, planning and guiding the development of the economy towards a sustainable growth pattern’ in cooperation with trade unions, business and other organs of society.
The document envisaged a ‘dynamic private sector, employing the skills and acumen of all South Africans and of business activities that contribute significantly to job creation, being actively encouraged’.
Ramaphosa said the state directs both growth and transformation through levers like competition policy, broad-based black economic empowerment provisions and employment equity laws, and by linking the award of various licences to universal service and empowerment obligations.
He added that one of the most important drivers of growth and employment in the country right now were state-owned enterprises (SOEs), but the private sector still had a key role to play with the government keeping a special focus this year on small, medium and micro businesses, on cooperatives and the informal sector.
“Through the redesign of the loan guarantee scheme that we introduced in the early months of the Covid-19 pandemic, we are making ‘bounce back’ finance more accessible for small businesses,” said Ramaphosa. “We are expanding the employment tax incentive and looking at various other regulatory changes to make it easier for small businesses to employ more people.”
These are among the measures government is taking to create the conditions that will enable the private sector – both big and small – to emerge, to grow, to access new markets, to create new products, and to hire more employees, he said.
The private sector employs some three-quarters of South Africa’s workers and accounts for over two-thirds of investment and research and development expenditure. South Africa therefore needs a thriving private sector that is investing in productive capacity alongside a capable and developmental state.
“As private-sector employment expands, more livelihoods are supported and sustained. Goods and services are delivered at a greater scale and the democratic state is able to collect more revenue for social development,” said Ramaphosa.
“The ‘Ready to Govern’ document says that the role of the state ‘should be adjusted to the needs of the national economy in a flexible way’, whether it is increasing the public sector in strategic areas or reducing it in others. Such a mixed economy, it said, would foster a new and constructive relationship between the people, the state, the trade union movement, the private sector and the markets.”
He said the government was now working to deepen and improve the relationship, to forge a new consensus for growth and employment.
“After a decade of low growth and rising unemployment, this is the way to revive our economy – creating a dynamic, competitive, fast-growing economy that is able to compete with the best in the world,” said Ramaphosa. “We will not achieve such an economy without both a strong and capable developmental state and an inclusive, fast-growing private sector. We should not be asked to choose one or the other. We need both.”