Supplementary Budget 2020

Gigaba’s 're-engineered' growth, transformation model

Pretoria - South Africa can’t repeat the past mistake of high economic growth, at the expense of an equal society, said Finance Minister Malusi Gigaba.

Delivering the mini budget on Wednesday, Gigaba emphasised the importance of achieving inclusive growth to enable transformation in the economy.

"Economic growth and transformation are mutually-reinforcing principles," he said.

The economic exclusion of the past has resulted in the imbalances seen in society. These include low participation of black ownership and management, challenges to employment equity with stalled progress of black people and women participating at stop and senior management. Other issues include a high degree of market concentration, low competition and high barriers to entry.

In several sectors, a "handful" of companies controlled 80% to 90% of the market, he said.

"Prospective market entrants find it extremely difficult to break in, as dominant companies enjoy seemingly insurmountable advantages," he explained.

Further, the segregated spatial planning of the past was adding to travel costs and job searches of South Africans, preventing equal participation in the economy, he said.

"These distortions in the economy are unsustainable."

No more 'tick box' transformation

For this reason a new growth and transformation model was necessary. Gigaba called for a model that promotes the sharing of economic resources, and not one that is a mere "tick box" compliance for patterns of ownership, control, management and production. Such a model should also be anchored in a "common vision" for the economy and society.

Gigaba said South Africa needed to demonstrate it was a country that worked. This would require collaboration between government, business, labour and society. Government should play its role as an "enabler" for, and an active participant in, growth and transformation. Investment by business to create growth and employment was "desperately" needed, he said.

Labour should also be productive, and society should support progress through "constructive dialogue, active citizenship and social tolerance".

Gigaba lauded the CEO Initiative for its role in creating a Youth Employment Service (YES) initiative to give one million young South Africans jobs and internship opportunities over the next three years. The CEO Initiative also set up a R1.5bn Small and Medium Enterprise (SME) fund, which would soon be operational.

"I highlight these developments to show the power in having a unity of purpose," said Gigaba.

Lack of trust

The slow progress in economic transformation had resulted in a lack of trust between stakeholders, in his view.

"Policy contestation has compromised the economy and confidence," he said.

Speaking about the controversy of the Mining Charter, as an example, Gigaba urged government and business to find common ground on the charter, to attract investment, advance transformation and benefit workers and communities.

"Government is eager to get all parties back to the negotiating table to find a solution," he said.

Government was also looking to rebuild confidence through its 14-point plan.  

"Business and consumer confidence are currently at historical lows. This has direct negative consequences for investment, job creation and household spending," he said.

Consultation with international investors had revealed that policy uncertainty, governances and weak balance sheets at state-owned companies, rising government debt and a constrained fiscal framework and perceived political uncertainty had eroded confidence.

Gigaba assured that some of the goals of the 14-point plan had been achieved, including the appointment of a new board CEO at SAA.

He added that the pace and scale of structural reforms needed to be increased.

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