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President Cyril Ramaphosa says it is untrue that South Africa must choose between a ‘developmental state’ and an expanding private sector that drives growth and employment.

Writing in his weekly open letter to the public, the president said the country needs both a state that plays a vital role in economic and social transformation, and an agile private sector. “We need them to work together and complement each other,” he said.

“This idea is not new. Thirty years ago, in 1992, the African National Congress adopted a document titled ‘Ready to Govern’. The document set out policy guidelines for a democratic South Africa and has, over nearly three decades, influenced the policy direction of successive democratic administrations.”

The ANC’s ‘Ready to Govern’ document envisaged a democratic state with ultimate responsibility for ‘coordinating, planning and guiding the development of the economy towards a sustainable growth pattern’ in cooperation with trade unions, business and other organs of society.

The document envisages a ‘dynamic private sector, employing the skills and acumen of all South Africans and of business activities that contribute significantly to job creation, being actively encouraged’.

Ramaphosa said the state directs both growth and transformation through levers like competition policy, broad-based black economic empowerment provisions and employment equity laws, and by linking the award of various licences to universal service and empowerment obligations.

He added that one of the most important drivers of growth and employment in the country right now are state-owned enterprises (SOEs).

Despite this, the private sector still has a key role to play, the president said.

The role of the private sector

A special focus for government this year is on small, medium and micro businesses, on cooperatives and the informal sector, Ramaphosa said.

“Through the redesign of the loan guarantee scheme that we introduced in the early months of the Covid-19 pandemic, we are making ‘bounce back’ finance more accessible for small businesses.

“We are expanding the employment tax incentive and looking at various other regulatory changes to make it easier for small businesses to employ more people.”

These are among the measures government is taking to create the conditions that will enable the private sector – both big and small – to emerge, to grow, to access new markets, to create new products, and to hire more employees, he said.

The private sector employs some three-quarters of South Africa’s workers and accounts for over two-thirds of investment and research and development expenditure.

Alongside a capable and developmental state, the country therefore needs a thriving private sector that is investing in productive capacity, Ramaphosa said.

“As private-sector employment expands, more livelihoods are supported and sustained. Goods and services are delivered at a greater scale and the democratic state is able to collect more revenue for social development.

“The ‘Ready to Govern’ document says that the role of the state ‘should be adjusted to the needs of the national economy in a flexible way’, whether it is increasing the public sector in strategic areas or reducing it in others.

“Such a mixed economy, it said, would foster a new and constructive relationship between the people, the state, the trade union movement, the private sector and the markets.”

It is this relationship that government is now working to deepen and improve, to forge a new consensus for growth and employment, the president said.

“After a decade of low growth and rising unemployment, this is the way to revive our economy – creating a dynamic, competitive, fast-growing economy that is able to compete with the best in the world.

“We will not achieve such an economy without both a strong and capable developmental state and an inclusive, fast-growing private sector. We should not be asked to choose one or the other. We need both.”



Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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