Gigaba: Govt must be decisive on economic transformation

Finance Minister Malusi Gigaba.(Photo: AFP)
Finance Minister Malusi Gigaba.(Photo: AFP)

Cape Town - The South African government must show decisive leadership with regards to inclusive growth and economic transformation, Minister of Finance Malusi Gigaba said on Wednesday.

"We must sustain the political will to drive it such that growth results are achieved, with real benefits for our people," he said at a breakfast roundtable of the Black Business Council (BBC) during the World Economic Forum (WEF) in Durban.

"We must be bold and creative, and not limit ourselves conceptually from imagining new approaches appropriate for our national circumstances."

He lauded the BBC for what he sees as the leading role it is playing in the economic transformation of the country. He would like to see the BBC in the role of the "patriotic bourgeoisie" as defined by African developmental economists. However, their business activity must enhance and not undermine national development.

Gigaba explained: "Make profits as you produce value added goods and services, and reinvest in productive capacity which helps us industrialise. Push government to use procurement strategically, but do not focus only on state procurement."

READ: Gigaba brings controversial advisers to Treasury

African deals and illicit flows

Furthermore, Gigaba would like to see Africans investing in Africa.

"We must not expect others to invest in what we ourselves are not ready to invest in," he said.

"We need to mobilise our domestic savings and capital markets to invest in deals on the continent. These include pension funds and sovereign wealth funds, especially from the proceeds of commodity exports."

In his view, resources can also be obtained by stemming the outflow of illicit financial flows, which rob the continent of resources.

He pointed out that the National Development Plan (NDP) emphasises the importance of regional economic integration, and added that government is excited about the developmental possibilities of KwaZulu-Natal as a logistics and industrial hub.

"Poor infrastructure, however, continues to undermine intra-continental trade," said Gigaba.

"While Africa’s infrastructure backlog is estimated at around $100bn per year, available financing covers only half of this."

Intra-African trade is at about 11%, whereas intra-Asian and North American trade both are at 40%. Intra-continental trade in Europe sits at 60%.

Unlocking industrial activity, intra-Africa trade, and growing Africa’s share of global trade is crucial for Africa’s development, in his view.

Gigaba said in many cases it is not funding that is missing, but projects which are well structured and bankable. According to the NDP, SA has over R4trn worth of projects in the pipeline.

Government is spending R1trn over the next three years in funding and delivering the most strategic and urgent of these. Many are attracting private investment as well, he said.

"What often holds us back are projects which have not been rigorously packaged through the various feasibility stages, (so that) they are ready to be funded with a clear path to repayment," said Gigaba.

He believes policy and regulatory regimes which attract investment need to be put in place.

"Weak policy in sectors like electricity and transport can hold back investment," said Gigaba.

"We have to balance political pressure for low user charges, with the need to establish user pay funding models which are needed to provide funding in a scarce resource context."

READ: Gigaba’s first 24 hours: Insights into the future

State procurement

Another important aspect for him is the strategic use of state procurement.

"With an integrated view, can we funnel this spend to domestic manufacturers to help them produce items which we currently import?" he asked.

"Our state-owned companies need to build relations on the continent, as there are many projects which they can co-deliver with our African partners, rather than these being delivered by foreign companies."

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