Business minister needs to back business

Earlier this week, in advance of Friday’s announcement on Moody’s credit assessment of SA, trade & industry minister Rob Davies addressed the Cape Town Press Club. His subject? “How government intends to place the economy on the road to recovery.”

Davies has been at the helm of the department of trade & industry for a decade. His long term in office presumably represents a post-Polokwane payback to the SA Communist Party (SACP), whose central committee Davies has long graced.

He has reached the age of 70 and will not be returning to parliament after the May elections. His departure feels like the end of an era. Which era remains open to question: some say the Jacob Zuma period; others the 1960s; still others, more unfairly, the Soviet Union of the 1930s.

Thabo Mbeki was removed from the presidency by a leftist coalition just as pro-market economic theology was called into question by the global financial crisis. This conjuncture resulted in an all-too-hasty resurgence of the developmental state and “strategic” state-owned enterprises.

A brand new department for economic development meanwhile formulated a “new growth path” totally at odds with the Treasury orthodoxy.

For his part, Davies took the much bigger department down a resolutely interventionist road, championing re-industrialisation, tightening black economic empowerment (BEE) policy, and latterly promoting the incubation of black entrepreneurs.

It is not easy to evaluate these programmes’ successes and limitations. It is telling, however, that Davies’ own list of departmental achievements includes “slowing down the rate of de-industrialisation”. A fifth of economic activity was in the manufacturing sector when the ANC came to power; today it accounts for little more than a tenth.

Davies claims he was not “picking winners” but “taking actions that allow winners to emerge”. But the motor industry programme has become a corporate subsidy, retained because of recurrent panic about the consequences of phasing it out. Davies cites the collapse of the Australian car industry.

BEE, as ever, remains both absolutely essential and totally unrealisable. Equity in existing businesses has been partially redistributed, but the policy has not helped smaller businesses and light manufacturing — white or black — emerge or grow.

Davies’ ANC faction, the SACP, has been critical of the emphasis BEE policy has placed on distributing equity to politically connected rentiers. As minister, however, Davies has been unwilling to countenance any rethink.

His record with regard to trade has also been mixed. He has admirably looked to the longer term when it comes to regional institutions and to China. But China and our Southern African neighbours are not serious investors in SA. Davies has repeatedly rebuffed the people who actually do invest here, including the UK, the Netherlands and Germany.

Like other ANC leaders, he has made policy for the partners he wishes SA had, rather than for the ones we actually have. Worse still, Davies has failed to represent the urgent needs of business inside the policy process. A major priority should have been reversing — or at least effectively mitigating — SA’s disastrous skilled migration policies.

Davies refuses to estimate the damage that has been done to business by electricity price hikes and rolling blackouts. He talks of a “dampening effect” on the economy, and concedes that those worst hit are small enterprises, emerging black industrialists and township businesses.

“Nobody had the intention of wrecking Eskom,” he suggests, failing to acknowledge the responsibility of ANC fundraisers (starting with Chancellor House), politicians and their families who have milked the Eskom coal supply chain, and party-sanctioned deployees to the boards of SOEs.

Davies also seems to have forgotten that as a loyal member of the SACP he backed the disastrous frustration of the 1998 energy white paper’s goals. He is still reticent about investment by independent power producers and the creation of a wholesale electricity market.

It is not yet clear how economic policy-making will change under President Cyril Ramaphosa. We can only hope that the department of trade and industry, or whatever replaces it, will be led by someone as clever and hardworking as Davies. But the new minister also needs to be in business’s corner.

• Butler teaches public policy at the University of Cape Town.

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