WHAT WOULD THE DA DO IN GAUTENG?

By Gavin Lewis, DA Spokesperson for Economic Development, Gauteng Province

A recipe for 8% pa growth for South Africa's leading provincial economy

 (Note: Provincial powers are limited in terms of the Constitution, so that some decisions, such as those on labour legislation, fall outside provincial competencies and into the national sphere of government).

Gauteng faces core structural impediments to growth.

1. Electricity shortages and costs severely hamper job intensive mining and beneficiation.

2. The absence of any linkages between wage increases and productivity makes South African labour too expensive to compete with many other developing economies.

3. Measured by international standards, entrepreneurship levels in SA are low.

4. Severe skills shortages impede higher levels of growth.

What is to be done?

1. Free entrepreneurship. The emphasis on supporting small and medium enterprises (SMEs) must be increased, and moneys from other economic development activities diverted to this cause.

In practice this means:

- Changing the Gauteng Enterprise Development (GEP) emphasis away from vague "training" towards set targets for SME support that measure not just quantity but quality, the latter being determined by sustainability. Over-dependence on state contracts for survival, while important in the start-up phase, must be only a step on the path to diversified markets, not a destination in itself. Independence, not dependence, must be the goal.

- In addition, there must be attention to new start-ups (accepting that many of them will fail) as well as to existing SMEs, and to SMEs able to make the transition from small to medium sized enterprise – because this is where the job creation potential is greatest.

- Identify more entrepreneurs. Entrepreneurs are people willing to undertake risk, not, as the current government thinks, people chosen at random off phone-in lists. Start with entrepreneurs selected from those companies unsuccessful at tendering, to train them to do better next time. Entrepreneurship modules should be offered at high school levels. Support township service providers by allowing them to share tools and equipment in a safe environment (e.g. electricians, mechanics etc.)

2. Good governance. Good governance grows the economy because it has the following attributes:

- It eliminates the corruption "taxes that add to the cost of doing business".

- Transparency in tendering procedures free of insider trading allows SMMEs to compete on an equal footing.

- Provincial administration staffs are measured by efficiencies, which means better, faster, cleaner licensing, zoning and other key inputs investors look for.

- It creates a climate conducive to economic growth and supportive of, not hostile to, the private sector.

- Involve the private sector more. Outsource GEDA (Gauteng Economic Development Agency) and export readiness training to the private sector entirely, to those who understand the sectors they operate in through personal experience. Involve the banks in the Tender Boards, to find new ways of financing emerging entrepreneurs.

3. Reduce crime. It hits SMMEs hardest. This means a properly trained, professional Metro police, amongst other things. Introduce lifestyle audits for high level officials.

4. Provide affordable infrastructure. The provincial government must lead the rapid roll out of broadband in alliance with the private sector at affordable rates, preferably free. This will raise Gauteng's growth rate (judging by international norms) by 1%-2% pa.

Administered prices, especially tolls and electricity rates proposed by metros and municipalities must be cleared at Provincial level with an eye towards their impact on jobs and growth. The East Rand refineries and plastics industries are losing jobs daily because of the electricity rates, for instance. All beneficiation projects are negatively affected, since they all require heat for smelting. Allow companies to provide their own power supply wherever feasible (co-generation) – and import it from Botswana.

5. IDZs/SEZs. Scrap the ORT IDZ currently being invested in by government. It will not work unless we can match labour concessions offered by international IDZs. Nor is gold jewellery manufacture going to work. We've tried it before, at Virginia, and it failed.



Re-examine every regional airport for its potential as an EPZ ( export processing zone), where goods (e.g. textiles) can be imported duty free for value adding and export here, using favourable international trade agreements (e.g. the American Growth and Opportunity Act). Link these to Local Economic Development (LED) projects in the municipalities and to the Johannesburg fresh produce market (extending the benefits to agro processing – see below).

6. Expand Exports. Facilitate trade with sub Saharan Africa, especially neighbouring Botswana and, through it, the Walvis Bay port in Namibia – cheaper than Durban. This includes ensuring border posts operate efficiently on a 24 hour basis.

Work with the Department of Trade and Industry (DTI)'s Trade and Investment SA, and with SA embassies worldwide to eliminate unnecessary and costly junkets by provincial officials abroad.

7. Job Zones. In depressed areas (e.g. former homeland decentralisation hubs) allow the creation of "job zones" where lower wages can be negotiated with unions to attract decentralised investments and improve geographic spread.

8. Innovation. Pay attention to innovation, in alliances with provincial tertiary institutions and expanded Innovation Hubs.

9. Promote tourism that draws on Gauteng's strengths. This means focussing on African, Indian and Chinese middle classes by facilitating the kinds of products these categories, which have much in common, desire. This requires different tourist offerings than we currently focus on. These attractions are characterised by the following:



- Family based

- Secure and comfortable

- Safe and predictable

- Group oriented

- Theme parks for families- e.g. Cradle of Mankind.

- Fashion and shopping, especially for brand conscious African markets.

Entrench the West Rand and use our 2010 stadiums to cement SA's position as an international high altitude sports training facility.

10. Arts & Culture. Provide more support for the Gauteng music and fashion industry. Devolve film support to Metro level for venues, permissions, etc.

Support international art forms where Gauteng has shown excellence, and which can be exported or attract tourists here – opera, ballet, orchestras. Build the Gauteng world city brand.

11. Address skills shortages. Return skills training to the private sector, so that people are trained for existing jobs rather than what training "suppliers"(i.e. SETAs) think would qualify them. Transfer un- or underutilised state training facilities to the private sector. Introduce the youth wage subsidy proposals. Encourage companies to hire youth on a trial basis, in return for incentives. Ensure that charity make-work activities, such as the Expanded Public Works Programme (EPWP), are focussed on infrastructure that is productive and that participants get proper certified training on the job.

12. Work with, rather than harassing, informal traders and survivalist enterprises. Get the Metro police off their backs. For very small companies, outsource to NPOs for support on Grameen Bank lines, and support them.

13. Eliminate unnecessary regulations that make it difficult to do business in Gauteng (on the lines of the Western Cape "From Red Tape to Red Carpet" model).

14. Grow your own timber. Metros to use underutilised SOC training facilities to train their own technical staff and provide jobs on completion, on the Cape Town model.

15. Provide business with a welcoming, predictable business environment that is a safe and enjoyable place for their employees and their families to live and work in.

16. Eliminate corruption through swift and public prosecution of offenders. No more "golden parachutes" for offenders.

17. Pay SMEs that win tenders and government contracts within 30 days of receipt, or you will destroy their cash flow.

18. Take care of existing investors. Identify major investors in Gauteng and appoint identifiable, knowledgeable, accountable Department of Economic Development (DED) executives available 24/7 to keep them happy and, if possible, to assist them to grow and export as well.

19. Develop small scale agro processing and link it to markets (e.g. via the Johannesburg Fresh Produce Market) through efficient inland ports.

20. Utilise SPVs with banks and private sector, especially for emerging contractors, to overcome finance bottlenecks.

21. Benchmark major infrastructure investments against international costings to avoid over engineered solutions. Focus on affordability as a key criterion.

22. When in doubt, get out of the way should be the motto of provincial government. Government should not be diverting scarce public resources where the private sector is willing and able to invest.