Busisiwe Mavuso | We need more private sector involvement to help govt solve SA’s problems

POSTED ON: May 13, 2022 IN by Admin

By Busi Mavuso

The more that government brings in the private sector to help tackle such problems, the quicker they will be resolved.

There is nothing better at eliminating inefficiencies than competition.

Of the four network industries that are so crucial for an economy to run efficiently and grow, three are largely dysfunctional – energy supply, rails and ports and water.

The one network industry that is operating efficiently is telecommunications, an area where government privatised the once 100% state-owned Telkom, retaining a 40.5% stake. That process began in 1996. In its latest interim results to end-September, Telkom grew headline earnings by 30.4% and its share price has increased by about 18% in the past year. The dividends it pays flows to the fiscus.

If Eskom and Transnet had been similarly privatised and their markets opened to competition at the same time, our country would be far stronger today because the inefficiencies and misgovernance that have plagued them simply wouldn’t have been tolerated in the private sector.  We’d have a well-functioning freight-rail system, our ports would be operating effectively and, as difficult as this may be to comprehend with load shedding now a regular part of our lives, we’d have a secure energy supply able to meet demand.

Government is moving in the right direction. It has recognised how damaging state inefficiencies are to the economy and made plans to address it – pretty much as the JSE did before improving its bureaucratic procedures.

President Cyril Ramaphosa has developed a unit within the Presidency to cut red tape across all government entities. Operation Vulindlela, which works to overcome obstacles to reforms, is also tackling the red tape that is holding up private sector applications to build their own power-generating plants.

I’ve welcomed these moves before but we need progress and it was encouraging to read that the Minerals Council is working with government to try to fast-track the application process for it to build private power plants. The process takes 18 months to get the environmental and other approvals required, which defeats the point of government having lifted the limit for self-generation of electricity to 100MW in the first place.

The council states that minerals companies have R30bn of capital projects waiting for regulatory approvals and there are 4,500 outstanding mining and prospecting licences. That reflects massive investment which will bring with it much-needed job creation, yet these are being held up by bureaucratic procedures as well as pure negligence, as are other potential investments in all sectors of the economy.

We need to free ourselves up from such bureaucratic quagmires so that the economy will operate more efficiently. However, it is incredibly  important when trying to reduce red tape, to ponder why each bureaucratic requirement was there in the first place. The important ones, often designed to protect consumers or guard against corruption, need to be retained but streamlined where possible. When in comes to government bureaucratic processes, however, there are far too many that are entirely pointless.

The more that government brings in the private sector to help tackle such problems, the quicker they will be resolved because not only our government but most governments across the world are incredibly inefficient organisations. Only in countries where there is strong competition through the electoral systems are governments run efficiently – but still, they can never match the private sector.

South Africa’s private sector is for the most part highly efficient, dynamic and globally competitive and that is the main reason why South Africa is still an investible destination. It’s the competition that makes South Africa’s private sector so efficient and government desperately needs its expertise.

Co-operation between organised business and government has produced excellent results in times of crises including the response to the pandemic, the unrest of July last year and the more recent flooding in KwaZulu-Natal. When working in partnership to tackle a common problem the results have been exceptional. We need more of that in all areas of reform.

*Mavuso is the CEO of BLSA. This article first appeared in Fin24.

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