Radical change needs radical policy

2014-10-08 06:45

For some time, industrial policy discussions have been the preserve of elite round-table discussions where senior government bureaucrats and less comprehending politicians in the trade and industry department engage in industrial policy, yet fail to take society along in these discussions.

Welcoming Herman Mashaba’s contribution (“You can’t create black industrialists like magic” – City Press, September 28 2014) does not mean that we agree with his notion of what should constitute black industrialists and industrial policy, mainly because his argument is premised on some quasi-religious recitals of a person who has not paid attention to practical industrial expansion.

While important, the efforts and entrepreneurial spirit of individuals are insignificant unless there are accompanying institutional and policy support mechanisms and systems, which can only be provided by the state.

Using Mauritius as an example does not help because despite being a tax haven for many multinational corporations extracting natural resources in other parts of the world, Mauritius is not industrially superior to the extent that South Africa can learn much from it.

The most reliable approach to creating black industrialists in South Africa is to aggressively pursue a radical industrial expansion programme because the industrial policy action plans pursued by the trade and industry department are very weak.

The government should develop productive forces, deriving useful lessons from the late industrialisers in east Asia that realised massive industrial expansion after World War 2.

One of the world’s great political economists, Robert Wade, said as early as 1990 that “market guidance” in east Asia in essence happened by:

»?Redistributing agricultural land in the early postwar period.

»?Controlling the financial system and making private financial capital subordinate to industrial capital.

»?Maintaining stability in some of the main economic parameters that affected the viability of long-term investment.

»?Modulating the impact of foreign competition in the domestic economy and prioritising the use of scarce foreign exchange.

»?Promoting exports.

» Promoting technological acquisition from multinational companies and building a national technology system.

» Assisting particular industries and introducing industry-specific policies to prevent industrial decline.

None of these critical components exist in South Africa’s industrial policy framework and attempts in this regard are uncoordinated.

Despite calls we made as youth activists and now in the Economic Freedom Fighters (EFF), there are no deliberate scholarships or bursaries to send young people to other parts of the world to attain skills and technology to be innovators.

Another important aspect to massive industrial expansion is localisation. As a critical component of this, the state should pass legislation that compels government departments and entities to procure a minimum of 75% of their goods and services locally.

This will create jobs and address South Africa’s perennial trade deficit that will cripple its capacity to expand now and in the future.

The last and perhaps the most important component to industrial expansion is a coherent and dynamic trade policy where the state can impose tariffs on imports and exports.

To foster local beneficiation and industrialisation, the trade policy should impose higher duties and taxes on exported raw and semiprocessed goods and services, and impose higher taxes on imported finished goods and services.

The call for state strategic ownership of critical sectors that provide industrial inputs such as platinum mines, steel production and other sectors is primarily aimed at ensuring there are available resources for industrial expansion in the country.

Under the control of multinationals, minerals and steel are as good as not being South African because they are sold to local industrialists at import parity prices.

Black industrialists need money to engage in industries and this calls for a cogent development finance institution bigger than the existing ones combined.

This means the state should establish a state bank whose mandate should include massive industrial finance.

Instead of financing BEE deals, the Public Investment Corporation, Government Employees’ Pension Fund and other entities should redirect their investments in productive greenfield industries so South Africa can stand proud in the next 20 years as a developed nation with capable industries that can compete globally.

» Shivambu is EFF chief whip and a member of the trade and industry portfolio committee

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