It takes two to dance the economic reform tango

First Published in Business Day on   August 6th, 2023   |   by   Isaah Mhlanga

It takes two to dance the economic reform tango

The private sector can help reform the energy sector, transport and logistics

More than 100 CEOs of South African corporates have signed a pledge to support the government in implementing economic reforms, focusing on three key areas: energy; transport and logistics; and crime and corruption.

There are sceptics who view this as another talk shop. There are also optimists who believe this is a step in the right direction.

Ultimately, the proof will be shown by the government’s willingness to cut red tape and follow through with decisions that improve the business environment; and the private sector's willingness to hold the government to account for its promises and make sure it delivers.

I was in a discussion about economic reforms and the role of the private sector when I was asked whether the private sector can reform the economy. This question at times begins with an implicit assumption of mistrust between government and business, where the private sector is viewed as an uncaring sector of society, only focused on profits, while the government stands for the poor.

This could not be further from the truth. Most people are employed in the private sector, earning wages and salaries that support their families. Where the private sector gets involved, most things tend to work and they deliver the intended results. This is not to say there are no failures, there are, but they are fewer than successes.

In attempting to respond to the question, one has to look at the history of where the private sector got involved in what was deemed a public good and the responsibility of the state. Some examples will not fit the pure definition of a public good, but the broader point is still illustrated where state dominated services eventually failed, having to be bailed out by the private sector.

“The private sector can help reform the energy sector, transport and logistics, and deal with crime and corruption”

The Post Office used to be the most used courier service in the country, run by the state and providing a public good. Notifications of traffic fines and parcel deliveries used to reach people on time. Soon there were long delays, and eventually the Post Office stopped delivering an efficient service. 

We no longer write letters because of the improvement in technology; we write e-mails and WhatsApp messages, but we still need to send parcels. Very few, if any, think of using the Post Office today to send parcels unless they are comfortable with the risk of losing that parcel for good.

If you ordered something online shortly before you started reading this column, it will probably be on the way to you by the time you finish. The private sector stepped in and provided what used to be commonly understood as a public good in a profitable and sustainable way.

Another example is quality basic education. There has been an increase in private school education providers who stepped in to help deliver a public good in a profitable way.

In health care, a few private sector providers emerged and offered a higher level of service than the public sector. 

I flew to and from Cape Town on Thursday. I did not use SAA because other carriers have entered an arena that used to be dominated by the state-owned company.

These examples do not provide solutions for everyone, but they do show that the private sector can undoubtedly reform the economy.

The latest example involves developments in the energy sector. Households alone have invested in just over 4,000MW of rooftop solar energy.

The private sector pipeline of renewable energy solutions is reported to be 66GW. This is the private sector responding to enabling regulation and legislation and providing what used to be commonly understood as a public good, but one that the state has failed to provide efficiently and adequately.

Given these examples and the private sector's willingness to work side by side with the government where legislation and regulation are enabling, I have no doubt the private sector can help reform the energy sector, transport and logistics, and deal with crime and corruption.

All that is required is for the government to be open and request assistance from the private sector where it struggles — which seems to be the case of late. 

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