Wanted: radical economic information

The stage had been set for a spectacular finale on the first day of the World Economic Forum Africa in Durban, with Finance Minister Malusi Gigaba expected to deliver the big reveal on the government's plan for radical economic transformation.

But the sizeable audience of investors, business leaders and domestic and foreign officials were left none the wiser how the plan would be executed.

Nor were they given a timeline that would provide some certainty in the coming months, although Gigaba gave a glimpse of what his vision of inclusive growth may entail.

Perhaps a more detailed statement on radical economic transformation came from Small Business Development Minister Lindiwe Zulu, who said in a separate event at WEF Africa on Wednesday that South Africa's constitution had to be amended to allow for the seizure of land without compensation for redistribution to black people.

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Gigaba had told his audience that radical transformation would entail "changing the structure of production by industrialising the economy" and transforming the asset ownership base by transferring assets into the hands of the black community.

"[We] cannot grow the economy on the basis of a large black community that remains without assets, either to consume or to invest in," he said.

He emphasised his claim that investors had no reason to fear. Radical economic transformation was synonymous with inclusive growth, he said.

This chimes with this year's WEF Africa theme of "achieving inclusive growth through responsive and responsible leadership".

Gigaba said: "What we are talking about is industrialising the South African economy, changing the structure of production, beneficiation, building an SMME sector, bringing young people into employment, investing in agroprocessing, building productive capacity in our township and rural economies."

Ownership patterns of the economy had to change by "expanding the economy, creating new wealth creators and a space for black people" to participate as owners and significant influencers of the economy, Gigaba said.

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"To that extent I have listened to people talk about radical economic transformation and people talk about inclusive growth. I find that they are talking about the same thing.

"They may not be using the same concept but the essence of what they are talking about is actually the same."

But businesswoman Gloria Serobe, speaking on Tuesday evening at an Old Mutual Emerging Markets event hosted by its chairman Trevor Manuel at WEF Africa - hours before Gigaba spoke - said the government needed the buy-in of three types of investors for radical economic transformation to succeed.

Serobe said these investors were globally considered to be significant: bankers, insurers and retirement funds. "Behind them are your policy holders, depositors and your retirement fund members.

"If this conversation of whether you call it radical economic transformation or inclusive growth is not getting to them, forget it, because you are not talking to the owners of capital.

"Until you get there you have no solution whatsoever ... As we speak we can deliver inclusive growth and those three investors can force CEOs to do what the government desires them to do and still grow. It can be done."

Serobe said South Africa's history "is unusual, so we cannot continue the way we are doing".

"If you want to push the boundaries on inclusive growth, you know where to go. It is very easy. You know who were excluded. It's blacks and rural people by default. If you want to touch the hot spots for inclusion, to attempt inclusion you must go there."

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Rwanda's former finance minister Donald Kabureka, speaking at the same event as Serobe, said: "I want to caution on the view that inclusion means redistribution from the wealthy to the poor."

Kabureka said massive transfers had a role to protect the weak and provide safety nets but "on their own have huge limitations". Policies had to be designed to reduce the requirement of these transfers over time. "Some people believe all they have to do is redistribution of assets. That works for a short time," he said.

Gigaba, a former ANC Youth League president, was involved in the party's regional structures in KwaZulu-Natal in the early 1990s when unemployment was rife among the young. National youth service programmes were devised as a response.

"We argued that in order to address it on a sustainable basis we need to change the structure of the economy, create aggregate employment in order to get young people working, but at the same time to come up with specific interventions," he said.

He said critics of the ANC have argued that the party was too conservative in the early years of democracy. "My argument is that we could have better changed the structure of production in the economy, to diversify and create a thriving manufacturing sector. We've done that to some extent."

Gigaba said there could have been more focus on beneficiation, developing skills and competency in young people.

"We could have implemented programmes such as greater investment into SME development and paying attention in changing the regulatory framework for the development of SMEs. We've not paid sufficient attention to developing a productive economy in the townships and rural areas."

The latter economy was based on "menial activities" such as car washes, hair salons and spaza shops, he said.

Spatial problems stemming from apartheid were not addressed sufficiently. "So you must understand the impatience for speedy change."

The Treasury was unlikely to borrow to fund these programmes but how the government used its R500-billion procurement spend would be critical, he said.

A programme driven by the Department of Trade and Industry to create 100 black industrialists had to be accelerated.

The office of the chief procurement officer at the Treasury had an important role in the empowerment of black people. "We need to focus on [state-owned enterprises] and procurement procedures and the extent to which we are able to empower black people who will become component suppliers to SOEs and other programmes.

"We are working very hard to continue attracting investment. The starting point is to implement structural reforms, to provide certainty with regard to certain policies that remain niggling among investors and to boost the confidence of domestic business, unlock their balance sheets so that they can invest in the economy," he said.

Gigaba added that programmes that were agreed on between labour, business and the government had to be implemented. These included the national minimum wage, the private sector's R1.5-billion fund for SME development, a programme offering internships to 1 million young people and another programme to include private participation in the government's R1-trillion infrastructure rollout over the next three years.

Minister Zulu had said "the country's laws are hindering the transformation of the economy".

Speaking on the sidelines of WEF Africa, Minister in the Presidency Jeff Radebe said land distribution was slow but land grabs were not considered at this stage. "Everything we do is in accordance with the constitution."

 - Additional reporting Reuters and Bloomberg

speckmana@sundaytimes.co.za