This is what business wants from the DTIC – BLSA

Business and the Department of Trade, Industry and Competition (DTIC) have many common goals, with South Africa’s economic well-being the most obvious. Therefore, business wants to help find solutions to any obstacles that stand in the way of achieving those goals.

This is the message from Busisiwe Mavuso, CEO of Business Leadership South Africa (BLSA). She says she was heartened by DTIC Minister Parks Tau’s commitment to engage the private sector in identifying priority areas to accelerate economic growth and implementing coherent industrial policy.

“In the spirit of collaborating for growth, shortly after his appointment, the minister reached out to BLSA and its members, among others, requesting that we share high-level issues big business face. There were few surprises as BLSA repeatedly highlighted the challenges and frustrations that accumulated over years of stagnant economic growth and alarming de-industrialisation.”

Mavuso says the BLSA’s members, including some of South Africa’s biggest employers, also made sensible, practical recommendations and it was encouraging to see the alignment coming through in the minister’s Budget Vote speech and those of his deputies.

“This commitment is an opportunity to build on the successful collaboration to date and it fosters business confidence, which is one of the key ingredients needed to get South Africa’s economy growing again.

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BLSA welcomes DTIC focus on more stable regulatory environment

“BLSA welcomes the focus on creating a more predictable and stable regulatory environment, clarifying industrial policy and sector support, coordinating economic policy to enable more effective policy implementation and ensuring greater transparency between the DTIC and the private sector.”

She points out that currently, complex and inconsistent regulatory requirements deter business operations and foreign investment, while frequent changes in legislation increase the cost of doing business and the compliance burden.

“Streamlining regulations to ensure they are clear and consistent will go a long way to address this and as was suggested by some of our members, a one-stop regulatory body could be established to simplify compliance processes. Involving universities and deploying artificial intelligence and research capabilities could assist with large-scale policy modernisation.”

In terms of industrial policy and sector support, it has been argued that the focus to date has been too broad, limiting its effectiveness. Mavuso says it makes sense, therefore, to concentrate on fewer sector priorities and revitalise the industrial policy action plans (or the master plans) for targeted sectors, starting with the green economy.

“In the process of revitalising the sector masterplans, the often-complex industrial and trade strategies to promote local industry and improve competitiveness, the focus should be on designing the framework to be adaptable to allow for ongoing monitoring and course correction as conditions change.”

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Powerful opportunity in special economic zones

Mavuso says there is a powerful opportunity for industry-government collaboration in the evolution of the special economic zone (SEZ) programme, which currently lacks both the required investment and a nationally integrated work programme.

“Incentives should be coordinated with other programmes or instruments run by the DTIC, be more evenly applied and be made visible to the foreign investors and export market players and future tenants who are the prospective users of the SEZ system.”

About the masterplan approach, she says it has the potential to be an effective industrial policy tool, but its success depends on addressing the challenges identified around evidence-based decision-making, balancing objectives, resourcing and cross-stakeholder alignment.

“Securing alignment and buy-in for the masterplans across different government agencies and the broader business community will be key.”

Mavuso also calls for greater economic policy coordination. “Several issues have been widely acknowledged as causing unnecessary friction and increasing the cost of doing business in South Africa. These include exchange control regulations, crime, skills shortages, unnecessary regulatory red tape, the need to broaden internet connectivity and the well-documented challenges related to energy security, reliable electricity and water supply and the ports, rail networks and logistics hubs.

“We acknowledge that many of these factors engage with mandates of other government departments. However, the work conducted by the DTIC has wide influence, impacting about one in eight formal private sector jobs in the country.”

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DTIC plays critical role in promoting investment

The department also plays a critical role in promoting investment, facilitating trade, stimulating industry and supporting global competitiveness and inclusive growth. Mavuso says the BLSA would argue there is logic in the DTIC leading a whole-of-government approach to these matters as the lead interface with industry and organised business.

“Harmonising policies between departments and sectors would establish regulatory certainty as a key element of South Africa’s value proposition to global investors and trading partners. The DTIC could lead this process as part of the “Invest SA” mandate and as an implementation thrust of the draft Country Investment Strategy tabled in 2022. “

Some specific areas of focus here are:

• Cross-government/industry collaboration to lower perceived sovereign lending risk to South African projects
• Constructive, growth-accelerating approaches to empowerment standards and practices for foreign direct investment in priority sectors and
• Addressing uncertainty around masterplans and their interaction with other national instruments.

Mavuso adds that the country also needs trade instruments, globally and regionally, to be harmonised and optimised. “The AGOA (African Growth and Opportunity Act) trade access negotiations are an opportunity to harmonise US market access with industrial policy instruments from the US that play to South African strengths, such as the low carbon industries.

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Other DTIC opportunities

“Another opportunity is industry-government strategic alignment on positioning with the EU on CBAM (Carbon Border Adjustment Mechanism), the rate at which carbon intensity is to be taxed should be paced and aligned with South Africa’s carbon tax regime and be commercially literate in both design and application to maximise both low carbon outcomes and developmental objectives.

“The African Continental Free Trade Area (AfCFTA) presents yet another excellent opportunity for South African exporters and should also drive increased traffic of goods through our ports and airports. With some sectors/industries unable to make the business case for investment due to the market size in South Africa, extending the market into the African continent would be a game changer.”

Mavuso says as there is consensus on the need for greater transparency and accountability between the DTIC and the private sector, the BLSA’s suggestion is to develop a public accountability system that tracks and publishes progress on key initiatives.

“South Africa has for too long battled with low growth, high unemployment, widening inequality and poor and failing infrastructure. While impressive policies have been crafted to reignite the economy, all too often implementation has failed, damning one of Africa’s largest and most industrialised economies.”