Time for sound economic proposition

News that South Africa is finally out of a technical recession following a recent announcement by Stats SA that the economy grew in the third quarter of 2009 by 0.9% was refreshing and encouraging indeed. The end of the recession brings with it hope that the economy will see a renewed appetite for new jobs and possibly growth in personal expenditure going into the fourth quarter of 2009. However, the third quarter GDP figure cannot and must not detract from the need to carry out a debate on how South Africa ought to position itself for aggressive economic growth over the next decade or two, in an effort to eradicate poverty and severe inequality between the haves and have-nots. While South Africa’s economy has strong elements of a first world country, led mainly by the advanced financial and manufacturing sectors, a large part of South Africa’s population (+24% remains unemployed). Furthermore, according to the most recently available figures from Statistics South Africa, South Africa’s poverty levels are at a staggering 47.1% of the total population, a significant majority of the poor being black. Obvious as this may sound, any strategy by government to grow the economy must therefore take into account the fact that poverty remains largely defined along race lines. Poverty means that those who are poor have a general lack of affordability and this creates other majors ills such as malnutrition, high prevalence of sickness and disease, higher levels of crime, low levels of education among the youth (as they need to start earning a living from an early age), among many other ills. As stated in my previous blog posting titled “Time for new education proposition”, if South Africa wants to become part of the “Knowledge Economy” it has to echnologies to enhance the production of goods and services. My proposal is that President’s Zuma’s government economic growth proposition therefore ought to contain the following key drivers:

An education system that aims to produce tertiary graduates specialising mainly in the hard sciences. Currently in South Africa education is compulsory up to the age of 15 years or Grade nine, my view is that this ought to be increased up to at least the age of 18 or grade 12 or an equivalent thereof;

Policies which are favourable towards entrepreneurship, be it through a more relaxed tax regime, easier access to funding or a combination of the two;

Policies which encourage exportation of the lucrative processed goods market, as opposed to the mere exportation of raw materials;

Policies which place even higher value on intellectual property rights than is currently the case.

This or any economic growth proposition will, in one way or the other, result in increased government budget deficit. The rich South Africans are already heavily taxed, therefore I would not support increased taxation to help prop up government coffers. Perhaps the time has come for our government to accept that we are a developmental state and that we would need to consider more borrowing in order to fund government expenditure. My assumption is that the investment made in the development of our people now and over the next decade would ultimately result in an economy that is grows at a fast enough rate than the cost of servicing the incurred debt. I have no doubt in my mind that the newly-formed Ministry of Planning in the office of The Presidency guided by Minister Trevor Manuel is already considering such issues.

Time for new education proposition

In my previous blog posting below I made a case in favour of the South African government devising an education strategy with a strong focus on the hard sciences. However, the real challenge facing the Ministers of Basic and Higher Education is one of preparing South Africa for the rise of the Knowledge Economy. Much has been written about the knowledge economy and what it represents and at the basic level, this is the economy where the “raw materials” used to generate wealth are information and technology. The economies of most developed countries are knowledge-driven characterised by a high degree of innovation as well as the use of technology as a way to enhance production and services delivery. Take a moment to reflect on the products and services you consumer or use on a daily basis and chances are these are most likely to originate from a developing country such as the USA, Japan, South Korea or some European country. These are countries that have invested a great deal in the education of their citizens because it is only through education that knowledge can be gained. In order to generate sufficient levels of knowledge to make South Africa compete on the international stage with regards innovation and technological advancement, South Africa must have a clear education proposition. Some of the elements which must be taken into consideration regarding this education proposition relate to how the education system is financed and the degree of access to such education by the average citizen. My opinion is that all children up to matric primary school ought to have free access to education. From secondary up to tertiary levels, students who achieve a pre-determined standard of results in terms of academic performance ought to receive free education. However access to education is only part of the education strategy picture, the three other key elements to consider are 1) the quality of teachers; 2) the quality of the syllabus, including the accessories needed to deliver the syllabus and 3) the quality of infrastructure, the bricks and mortar. This strategy would no doubt increase government’s education expenditure but it will no doubt contribute towards creating a more knowledgeable society. To this end government would need to find other ways to finance education, this could be through diverting some of the funds from the national lottery towards the Basic and Higher Education Ministries, as well as some form of a tax. Perhaps instead of creating a completely new tax to fund the new education proposition budget, government could indeed divert funds from an existing tax towards this purposes. Another more obvious option but perhaps not so easy to achieve is to reduce the budget allocation of one department or more and increase the overall budget of the two education departments. If South Africa is to become globally competitive, we need an overhaul of the education system because what we have now will simply not cut it.

SA requires ambitious education plan!

In her celebrated article in the Asian edition of "Time" magazine titled “School Daze” which focuses on the evolution of the education system in Asia, American journalist Hannah Beech observes that, “the East Asian economic miracle was built on a number of sturdy pillars: hard work, high savings rates and Confucian values—in particular, an almost fanatical belief in the value of education. And for years, Asia could rest easy in the know-ledge that its school systems were producing the best and the brightest.” Without any doubt education has played a big part in the transformation of many Asian economies (Japan, Malaysia, Singapore, Hong Kong, Taiwan, among others) from the poor nations they were at the turn of the 20th century to first world economies by the end of that century. From the very onset Asian governments chose the strategy of “producing” skilled scientists through education as a way of growing their economies. The success of this strategic focus on education as a way of developing and growing Asian economies is now a matter for the history books, but what can South Africa learn from this experience? South Africa needs a bold and ambitious education strategy coupled with other strategies, aimed at advancing government’s overall vision of establishing a prosperous nation. I suspect that part of this bold new education strategy would include the identification of the key disciplines necessary to transform our economy, the Asian countries chose to focus on the hard sciences however upon analysis it may emerge that South Africa could well be better suited to focusing on social sciences. Given government’s limited resources, a choice between two (hard versus social sciences) has to be made. A key consideration on the choice between the hard and social sciences is that government would also have to consider the impact on both school level and tertiary level curricula. Funding is also a key consideration in terms of the education strategy chosen, many Asian countries have preferred the option of free education up to tertiary level as this ensured that individuals who excelled at school level could seamlessly progress to tertiary institutions thus guaranteeing a steady supply of qualified graduates into the labour market. For me the choice is a simple one, South Africa’s government must focus on an education system which puts great emphasis on and gives great reward to individuals who excel in the hard sciences. One hopes that these are the kind of issues the National Planning Commission, once established, would grapple with.

ASA needs revamped corporate structure

South Africa is a nation of sports fanatics, people passionate about their teams and the individual sports stars. That South Africa has won the IRB Rugby World Cup twice since readmission into world sport is bears testimony to our ability both on the sporting field as well as in the boardroom. For years the rugby boardroom under the auspices of SA Rugby and Football Union (SARFU) was under the strong leadership of Dr. Louis Luyt whom some argue that he single-handedly put in place the foundation which set South African rugby on its path for success. Like rugby, South African cricket also enjoyed the leadership of a strong individual, one Dr Ali Bacher, who also set in place great foundations for the success that South African cricket currently enjoys. South African football was also blessed with the astute leadership of the late Dr Stix Morewa, whom many accredit with championing the professionalization of the football in our country. Athletics on the other hand has enjoyed relatively more success on the field than in the boardroom. At the risk of upsetting former leaders of Athletics South Africa (ASA), the organization has not had the fortune of a great leader at the helm and ASA therefore lacks the critical foundations such a leader would have put in place to ensure sustained success. When ASA first came into being it had a corporate structure that included a President and a Chief Executive Officer at the helm. The CEO then had a team of expert sporting administrators as part of his team. I say, bring back this structure. ASA, under the leadership of Leonard Chuene who effectively serves as an executive President of the ASA, coupled with the fact that ASA also no longer has the role of CEO has lead to the current impasse. I say, the President of ASA must be non-Executive, ASA must have a CEO who must be surrounded by a team of professionals to help run the sport more professionally. This team of professionals could range from medical and fitness experts, to seasoned marketing and communications individuals. The involvement of politicians in the running of sporting organizations should always be limited, if there’s to be any involvement at all. However, such is the extent of the disaster at ASA that in this instance I would urge the Sport Minister to get involved. Get involved in changing the corporate structure as I’ve suggested above. Professionalizing and corporatizing ASA is one of the few ways in which the Athletics body could regain credibility and over time re-ignite sponsors interest in Athletics. After all, sponsors provide the much needed funding towards the development of the sport, sponsors are the lifeblood of athletics and indeed of any sport.

ESKOM now needs an outsider CEO

There’s no escaping the story regarding the leadership debacle at ESKOM what with every media covering the developments. Since the story is so topical I’ve found it necessary to make my own comment. Let me say that the Board of Directors of Eskom under the previous Chairman, Mohammed Valli Moosa, should never have appointed Jacob Maroga as Eskom CEO. As an insider and up to the point at which he was appointed CEO, Mr Maroga was part of the executive team which for a long time failed to steer ESKOM in the right direction, so it was always going to be difficult for him to make a real difference as CEO. The current Board would be well advised to appoint a complete outsider to replace Mr. Maroga, that is if the news that Maroga has resigned indeed turn out to be true. So where should the ESKOM Board look to find the new CEO? Well one of the first places to look would be at former Anglo American executives. You may be aware that recently Anglo announced a restructuring which resulted in some really capable people such as Ian Cockrell leaving the organization. Other Anglo executives left months ago, soon after Cynthia Carroll was appointed CEO. These former Anglo executives are seasoned professionals who should be able to do a great job in turning around the fortunes of ESKOM. The beauty about Ian Cockrell is that he used to run the coal division at Anglo and coal as we know is a very critical raw material for ESKOM in the generation of electricity. So imagine a CEO who has an intimate understanding of the inner workings of coal mining and the coal industry in general. Whether it’s Cockrell or someone else, ESKOM needs an outsider CEO, someone who can look at the problems facing the state enterprise from a different and new perspective. ESKOM is one situation where appointing someone from within would be a mistake that the Board and the South African public simply cannot afford.

What if SA Gov was run like GovSA Ltd! – Final

GovSA Ltd’s Profit Proposition

Government generates all its revenues from all sorts of taxes ranging from corporate tax; individual tax (the biggest revenue generator); surcharge tax on certain products and services; value added tax (VAT) as well as customs and excise duties. However, as we’ve seen with the recent mid-term budget policy statement delivered to parliament by Minister Gordhan, sometimes the revenue raised from taxes is simply not enough to accommodate government expenditure. When this happens government usually has two options available to it regarding additional funding namely, borrowing or the most undesirable option of them all, the simple of printing money via the Reserve Bank.

The most ideal option for any government is clearly to generate enough revenue from taxes to cover total planned expenditure; this therefore requires a very clear profit proposition or tax and revenue collection strategy by government. At a provincial and local levels, government generates some revenues from charging for certain services such as water and electricity as well as from fines levied on certain transgressions such as traffic offences.

The role people and technology in Government

A key success factor for government in effectively collecting all monies to due to it is to ensure that it has well trained people doing the collection job but more importantly government must couple this with the employment of technology to make the revenue collection more convenient. In part two of this series I highlighted government’s success in employing technology to collect taxes through its e-Filing platform. Another great idea that government has employed is the electronic payment method for traffic fines. Where government seems to fail is in the collection of revenue from household- related services , specifically standard rates and taxes. Local government seem to find it difficult to properly administer the billing regarding rates and taxes and as a result many homeowners fined themselves unintentionally in arrears owing thousands of Rands as a result of poor government systems and processes.

GovSA Ltd’s People Proposition

By far the most critical proposition which is essential to effective government is a people proposition. Government’s people proposition should aim to have a motivated and well trained staff. We often hear of commercial organizations strategically focusing on attracting and retaining top talent as, imagine therefore if the government of President Zuma had the same focus. Having top talent in government is certainly one of the most critical requirements for excellent service delivery. Ultimately .President Zuma’s success in execution depends on both its people and its partners, to this end the values as defined by the President Zuma must form part of the culture of the GovSA Ltd. organization as a whole.

Gov SA Ltd’s Performance Evaluation

Performance against each of the three value propositions discussed in this series, namely government value proposition, government profit proposition and government people proposition is essential. Therefore, having a strict performance evaluation mechanism across all government departments is key with scorecards that trickle all the way from the top of the organization to the individual employees on the ground. The Managing Director of the newly formed division of Performance Management Monitoring and Evaluation would play the role of providing the guidelines of how performance ought to be evaluated and how often the evaluation ought to take place. However it’s not enough to have government scorecard in place, what is critical is that this scorecard must be made public and the results of government’s performance against such a scorecard must also be made available to the citizens. Imagine how refreshing it would be to have a government that is transparent and willing to share with its citizens on its successes and falilures.

A new solution for Zimbabwe

Let me at the outset acknowledge that the political problem in Zimbabwe is very, very complicated indeed. Many organizations and people of influence have been and are busy toying with ideas about how best to resolve this problem so that there can be political and economic stability in that country. The power-sharing idea was a good one and it seemed to work for a while. However I suspect that if one were to examine the details of the principles of the power-sharing deal more closely they would reveal that the deal was doomed from the start. I say this because I truly believe that in order for any deal to succeed in Zimbabwe the deal must be based on resolving the real dilemma. The dilemma is that on the one hand President Mugabe, through the courts continues to press charges against opposition members and leaders. On the other hand President Mugabe himself must surely be fearful of the threat of prosecution of himself and ZANU-PF members by future governments.

Let me therefore offer a very simple and yet not entirely original solution to the people of Zimbabwe. The ZANU-PF led government to drop all criminal and civil charges against all MDC and other opposition party members and offer unconditional immunity against prosecution for all related past offences. This immunity must also extend to members of ZANU-PF including President Mugabe himself. I strongly believe that the threat of prosecution of ZANU-PF members by future governments, especially governments led by current oppositions parties, is partly what is motivating President Mugabe to stay in power. Remove this threat and perhaps President Mugabe and his people will see the political problem in Zimbabwe differently, President Mugabe might instead find motivation in ending the instability and put the citizens of Zimbabwe first.