The department of trade, industry & competition was predictable enough: lists of sectors and interventions. The timing couldn’t have been less fortuitous scarcely 24 hours after ArcelorMittal had announced about 2,000 job losses.
The message to business was that money is available if you fit into a cookie-cutter mould and want to partner with the government. If you just want to get on with it, less is on offer.
The government has a love affair with interventions. These appear to be trying to mimic the automotive industry, which is unique with its huge ecosystem of small, medium and micro-sized enterprises, upstream suppliers and downstream demand. Other industries, such as mining or high-tech manufacturing, struggle with this setup.
The public enterprises speech extolled the religion of state-owned enterprises (SOEs) by unhelpfully referring to the conditions that they can flourish in — which don’t exist in SA. SOEs in Singapore, China and Europe run off some of the world’s best education systems, an acceptance of foreign talent and wider, more developed industrial complexes to match.
No mindset change
A quick whizz around a range of business leaders after the speeches suggested some serious head scratching. The home affairs speech mentioned skilled-immigration visa processes improving with e-visas but made no mention of the key skills list, which is the real bugbear of immigration policy.
Overall, a business with rock-bottom sentiment would have little reason to feel any better because it was clear there was no mindset change from the government.
This isn’t to say there isn’t reform. The more efficient deployment of government funds for industrial development (even if picking winners doesn’t create growth), the move to e-visas and the speeding up of business registration processes are all positive and will help get from negative to zero per capita growth.
A recovery will take place — the point is to where and how quickly.
One particularly egregious set of references among the speeches that led to the most head scratching among business was energy policy. This left the unanswered question: what does the government favour? Surely an energy policy should maximise jobs, investment and growth, and minimise tariffs for users, and supply risk. The Integrated Resource Plan process doesn’t seem to be aimed at optimising this mix. Instead a cadre is put in charge of colouring in boxes for different energy allocations using MS Paint.
Gwede Mantashe made it quite clear in his energy budget speech that the key optimisation point is utilisation of SA’s resource endowment. Why this should be so important is unclear — certainly not why it should be more important than tariffs or jobs. Does the endowment include SA’s world-beating solar energy reliability? That is a resource after all.
The department of trade, industry & competition budget speech was all about lowering tariff costs — something no one has ever explained. Does it mean cross-subsidy between users? Taxpayer subsidy to industry? How is all this meant to work when Eskom still has tariffs that do not reflect costs. Surely it would be far easier just to have a system producing the cheapest power?
The government is clearly not undertaking any proper optimisation. Work by the Council for Scientific and Industrial Research has shown clearly how it is possible to optimise a system with lower tariffs (saving up to R60bn annually), more jobs (maybe up to 60% more than alternatives) and more investment and growth under a steady but sure transition towards renewables (with battery and gas balancing) and away from coal.
The government could maximise jobs and keep unions on board as well as do the hard graft through BEE schemes’ involvement in the Renewable Energy Independent Power Producer Procurement Programme to keep broad vested interests happy. Indeed, there is evidence that there is a slow winning over of unions to renewables.
Yet the status quo in the government of maximising use of the resource endowment combined with pipe dreams on industrialisation — despite so much evidence and failed work done in the past 10 years on both clean coal and nuclear — remains stubbornly in place.
SA should be feeding the seeds of tech and fintech start-ups with talent and policy support, not trying to resurrect a globally problematic nuclear industry from a standing start.