DAY 2: World Economic Forum on Africa: Connecting Good Intentions with Sound Economics

Inclusive growth dominated discussions at the World Economic Forum on Day 2. The theme reflects an Ineng focus on the specific role of the entrepreneur, since our first Entrepreneurs in Public Policy (EPP) workshop with the Global Shapers Hub in Cape Town in 2013. Entrepreneurship does not succeed in a vacuum. For it to work to the benefit of society driving growth, the policies and institutions must be sound.

 

Inclusive Growth Ensures Entrepreneurship Better All in Driving Economic Development

 

All people require a society in which freedom is meaningful and coupled by access to resources, the opportunity to thrive and a substantial liberty that makes democracy’s benefits real and tangible to every citizen.

 

There are definite ways in which the youth of today can start looking at the policies needed for a brighter tomorrow in a way that maintains the foundations built by those who have gone before us, whilst recognising new and improved means to achieve the goals of a free society based on human dignity and access to resources. Some of the ideas formed through EPP workshops run by Ineng touch on key issues that relate to growing an economy in which exclusion is eliminated.

 

Connecting Good Intentions with Sound Economics

 

Our economic policy approach must recognize what academics such as Nobel Prize WinnerFriedrich Hayek (1944) and empirical studies including the Index of Economic Freedom (Gwartney et al: 2008) have continuously demonstrated: that a free economy under the rule of law correlates to greater degrees of democratic flourishing in which human rights and opportunity are realities that later generations come to accept as the norm. There is no greater end-task than accomplishing the aspirations of the Freedom Charter, guided always by new innovations and developments in progressive thinking, alongside the lessons that teach us how best to apply the principles of the Freedom Charter to unlock the noble goals it espouses.

 

Stimulating growth means allowing for the flourishing of the greatest resource we possess: the human mind. People, not raw materials or natural assets, are indeed the foundation of a successful economy. Contrast the success of resource-poor nations succeeding economically, as in the case of Japan, while those well-resourced are often held back by war, corruption and the hallmarks of bad governance. It is here that our policy must not negate the enormous power of the entrepreneur in a path to economic success. The struggle in South Africa was not simply for freedom, but for free people. Behind the quest for dignity and access to equality as one nation, were the souls of all who fought for a goal greater than themselves. Each citizen of the country is part of something bigger and our economic policy must seek to free each to be the best he or she can be. Such a task is not an individualistic one, but a duty towards the struggle of a common past for freedom. The task of the present calls us to give that freedom meaning and real value for millions who remain cut off from the wealth and possibility South Africa holds. When we discuss economic development, we cannot but refer to those amongst us who have the skill and gifts to aid in job creation and the delivery of goods and services: the entrepreneurs.

 

Freeing the Innovators

If entrepreneurship is to be successful it must exist within a legal and political framework that protects private property and guarantees equality under rule of law, while not suppressing the creative commercial spirit through unnecessary regulation and a burdensome tax regime.

 

Entrepreneurship requires persistence, creativity and a willingness to meet and serve the needs of others. In order to facilitate entrepreneurship, we must not fail to acknowledge the need to create a culture of enterprise in addition to the legal and political framework conducive to its stimulation. We must look to encourage competitiveness, service and a bottom-up approach to community concerns.

 

Education Choice

 

Beginning with education, a national policy of school choice through a voucher system urgently needs to replace the existing failed centralization of school policy. In the process, this will foster the emergence of schools that compete for excellence by rewarding achievement and cohesion, whilst penalising non-performance as the brighter students and parents decide where they wish to use their vouchers. The laws of economics remain the same when applied to the realm of government action.

 

Over time, an education environment that fosters healthy competition, choice and excellence will quickly provide the market with a generation of school-leavers whose education has made them ready to take their place in an open opportunity marketplace.

 

A National Agenda for Entrepreneurship

 

A national agenda for entrepreneurship concerns not only entrepreneurs, but extends its benefits to all. Wealth creation benefits everyone; jobs are created, the competition leads to healthy pricing and citizens are provided with more choice. As Joseph Schumpeter has demonstrated, entrepreneurship drives the process of economic development (Schumpeter, 1934) as agents receive incentives to recognise previously unnoticed opportunities, whilst being able to create entirely new opportunities out of a climate of inventiveness that quickly rewards creative solutions to everyday problems. We are a nation that knows the value of history and we as South Africans cannot ignore the historical evidence. The greatest improvements in standards of living achieved during the past two centuries have been associated with the development of personal resourcefulness and ingenuity under a system of private property rights and contractual liberty (Landes, 1999). It is for this reason that entrepreneurs, regardless of origin or current level of success, must be at the heart of our plan to stimulate growth within a proven policy framework. The most recent studies in economic development have identified small and medium-sized businesses (SMEs) and entrepreneurship as the underlying key to economic development and prosperity.

 

Growth is Possible and it is Real!

People create wealth and their level of creativity and innovation is inextricably linked with the legal and political system in which they operate. Lending proof to this argument is a recent study of modern China’s economic development. In Capitalism with Chinese Characteristics: Entrepreneurship and the State (2008), Yasheng Huang argues that China’s economic take-off in the 1980s was fuelled by private entrepreneurship, which was facilitated by microeconomic flexibility, access to capital and enhanced property protections.

 

Past Oppression Should Not Be Allowed to Obstruct Fresh Possibilities

Though China was a totalitarian society with a history of suppressing creative entrepreneurship, in much the same way the apartheid regime suppressed the possibility for black achievement, until a change in the political framework stimulated innovation and a culture of enterprise that has brought over one million people out of poverty. In comparison to the situation China faced prior to implementing economic reforms, South Africa’s challenge is relatively small. Our already well-established first world infrastructure is ripe for expansion to integrate the informal sector. Now is the time for policy framework to encourage property-ownership and reward innovation through the market. Externally, our relationship with the rest of the world must include a free trade agenda. Our once-historic isolation from the world cannot be repeated.

 

Replace Failed East European Assumptions with Entrepreneurship

The zero sum-game advanced by some using out-dated economic assumptions that collapsed with the Berlin Wall views poverty as a consequence of some direct exploitation in which the state must step forward as supreme “custodian” of the country’s wealth. Yet the reality of underdevelopment is that it is not exploitation per se, but marginalization from the mainstream of the economic life of the nation. We require a society of ownership by the people, not the state, if we are to provide sources of capital for the citizens.

 

Ownership for All!

Private ownership, property titling and the rule of law must facilitate an open investor-friendly business environment to stimulate job creation, personal responsibility and an ever-expanding network of opportunity in order to uplift the poorest of the poor. Putting the wealth-creating capacities of our nation into the hands of an elite ruling majority will not create wealth and opportunity. As experience across the world has demonstrated, such measures lead to the exact opposite. State governments have been and continue to be the worst exploiters of human beings.

 

End Apartheid’s  Legacy Once and for All!

The South African government owns much of the land that was forcefully taken by the apartheid state to serve their variant of white National Socialism (Louw, 2009). The land must be returned to the disenfranchised under a system of property-titling and private ownership. With private ownership come the opportunities to obtain loans against what one owns in order to start newenterprises and invest in further training or education. The government’s inheritance of apartheid government confiscations must be returned to the people through the privatization of failing state assets and the resources the state currently owns to entrepreneurs, accompanied by a structured transfer of proceeds to those directly exploited and robbed under the apartheid regime. Perhaps we can look no further than Temba Nolutshungu, a jailed contemporary of the late Steve Biko, who more than anyone else today remains a voice of the past with a solution to fulfilling the dream of a better future: a future in which we can all live not only in freedom by name, but a freedom that translates into decent living standards, fresh opportunities and the dignity that comes with succeeding as Africans on a continent that has so much to offer at precisely a time when global uncertainty calls for new ways of thinking. We showed the world that peace amidst the most trying of circumstances is possible to achieve. Each of us can take confidence in knowing that prosperity in the midst of poverty is a birthright each can obtain.

 

African Innovation, Global Reach

To attract the world’s business and entrepreneurial innovation, investment-specific measures are needed side by side with the empowerment of our own citizens. Tax is a word all tax-payers learn to live with; and as much as governments may claim to reduce it as best they can, the Nobel Prize-winning doctrine of public choice theory reminds us that national leaders will often extract as much of it as possible, even if such policies are against the best interests of the people (Buchanan, 2003).

 

Therefore as part of a declared political will to attract investment, one of our key actions should lead us no further than Mauritius on the issue of taxes. Tax havens, however globally unpopular amongst some ruling elites, are not a new invention of the wealthy nor do they remove overall welfare; instead, they stimulate innovation and contribute to real economic growth in the countries where they exist. Zones with lower taxes promote investment and economic growth. From 1982 to 1999, GNP in 17 tax haven countries was over double the world average (Grube, 2009). By lowering taxes we can promote economic growth and create jobs that did not previously exist. As I speak each day to creative South Africans, I hear of the burdens of complex rules, red tape and excessive regulation costs dampening the energy, drive and possibility of some of Africa’s most promising children. We should keep in mind that when well-intentioned rules do not live up to the outcomes of a free and prosperous South Africa, we need to gather in a lekgotla[1] and ensure that reforms are put in place to improve the country’s working environment.

 

Ensuring Small Business Is Afforded Big Possibilities

The Small Business Project’s (SBP) Reducing the Cost of Doing Business in South Africa report found that it costs formal sector companies in South Africa R105,175 a year, on average, to comply with regulations. These costs are pure red-tape figures – the costs that accumulate because forms have to be understood, filled in, and submitted. How can we expect the poorest of the poor and the majority of our people to finance this enormous financial burden? Unless we change the current situation, the majority will remain locked into the informal sector.

 

Universal Equality: In Dignity and the Opportunity to Trade

In a global economy, where our success as a nation depends on full integration of our people and country into the mainstream of the world markets, our counter-productive forex exchange controls must be removed. South Africa’s apartheid regime, following its first introduction in Nazi Germany, implemented the practice in order to prevent capital flight as part of an effort to maintain an inward-looking, isolated state. The fact remains: rands do not leave South Africa through the foreign exchange mechanism. In order to acquire the money needed for offshore investments, South Africans trade their own hard-earned rands for foreign currency. These rands merely change owners. Former Reserve Bank government Gerhard De Kock lamented the failure of our forex controls, implemented shortly after the Sharpeville massacre. Former president Nelson Mandela said their removal must be a matter of time. (Louw, 2009). That time is now. The freedom of our people to trade and invest easily with anyone in the world, regardless of their origin or country of residence, is a human right. Isolation was a characteristic of apartheid. Our interaction and ability to provide decisive leadership and hope to the world by example and goodwill must stand as a testament to our place in the world and pride in our ability.

We must recommit ourselves to uphold the values and traditions to which scores of the country’s national heroes dedicated their lives. Our recommitment must include a reconsideration of policies that have failed our people and a will to replace them with fresh ideas that uphold the historic values upon which our freedom rests. We must work tirelessly to build a non-racial, non-sexist, united and democratic South Africa, founded on the positive values that are enshrined in the Constitution.

 

In facilitating entrepreneurship as a nation-building agenda, alongside foreign investment and job creation, surely the basic dictates of morality require that primarily attention be paid to the most destitute? As part of an action plan to uplift all South Africans, we cannot forget about those who find no place in our nation’s economic life: they are the unemployed.

 

Service Delivery

Many South Africans are complaining about promises on service delivery not being kept and the failure to provide them with housing. Many of these complaints would disappear if they could only get jobs; any jobs where they can learn skills and recover their self-esteem. Being without work and being unable to get a job, month after month, year after year, destroys the self-worth of the individual. The people know instinctively that something is badly wrong but cannot understand why there is zero demand for their labour.While we face a serious crisis, we have within our own nation the resources to resolve the challenges.

 

These are not challenges of freedom, but challenges that call us to fight using our hard-won freedom to make democracy meaningful. A freedom that ignores the social and economic fundamentals is a freedom without substance, a freedom without a soul, a freedom wholly alien to those who secured a united South Africa with their blood and sacrifice, spurred by their faith in a brighter future that is as obtainable as it is necessary.

 

Conclusion

South Africa is alive with possibility; however, for it to be fully lived out in the lives of its people, the government has the duty to ensure that every individual and community is able to realize their own dreams. That will mean control in economic decision-making is transferred to the people, while the government safeguards the freedom and enterprise of each person to the benefit of the national prosperity of us all.