Business Day
*What is expected of business?**Editorial Opinion, Front Page, Business Day, Johannesburg, 15 February 2011*
WHAT is it, exactly, that the government and its supporters want from business? Strong comment following President Jacob Zuma 's state of the nation speech last week suggests that, somehow, business is not "coming to the party" and playing its part in the creation of jobs and thereby helping to solve S A 's greatest problem --- poverty.
The African National Congress (ANC) has always had misgivings about business even as it has tried to co-opt and join it, and, as it has loaded taxes and levies and favours and rules and allowed its senior officials to criticise and demonise business without any restraint, business has become a little wary of the ANC in return. So the two stare at each other from their trenches today. There is little mutual trust even though they share a common enemy in poverty.
But then Mr Zuma made an important concession to business last week that may have been missed in the general dreariness of his address. Speaking of the need to create jobs and the target of 5-million new jobs in 10 years the ANC has set itself, he said: "While looking to the private sector in particular to help us create most of the jobs, government will certainly play its part."
That is a fairly unambiguous recognition of where the president thinks the job-creating power in the economy lies (and will continue to lie) and it is a challenge (and a recognition) that business should welcome.
Businessmen are not good politicians but if they are left to follow their (often unattractive) base instincts, they are capable of delivering great wealth to the country.
It is always good to be reminded that the only unborrowed money the government has with which to relieve poverty or build infrastructure comes from the taxes that companies pay (personal income tax is a minor contributor to the total) and that taxes can be retrieved only from companies that make profits. In S A , about 20 mainly private-sector companies form the backbone of the entire economy and the tax pot from which the state feeds.
So it is vital, as the government seeks to cajole the private sector into creating jobs, that it understands how delicate the corporate equation is. Every job created by a company is an investment, and every investment is dependent on just one slim emotion.
It is called confidence, an ephemeral feeling that is easy to take for granted in others. Business in SA is being asked to invest while the government (for internal political reasons) allows way too many vital questions to float about unanswered. Uncertainty is the enemy of confidence and if Mr Zuma wants jobs from business he must create more policy and political certainty.
One way to start would be to try, when he replies to the debate in Parliament on his speech in the next few days, to craft a more precise answer to the question we posed at the start --- what does he want from business? The more detail he can pack into what he wants, the better business can respond. Just like the aftermath of his speech, in fact.
In a way, the diversity of the responses to Mr Zuma's speech is good and bad. It is good that people feel free to express their opinions, both for and against the government's approach to addressing the priorities outlined in the speech. The exchange of ideas is vital in a democracy, as is the knowledge that criticism will not be equated with treason.
But at the same time, progress demands a degree of consensus on the basics. The government cannot, as Mr Zuma seemed to recognise, achieve its goals on its own. It needs buy-in from private capital, labour and civil society.
This is explicitly recognised in the government's New Growth Path framework for economic growth, but if we accept that the government cannot go it alone then it's also worth asking, what should it be doing?
The ANC often gives the impression of having given up on the private sector, either because it does not believe capitalists will ever see the world through its eyes, or because it is convinced the New Growth Path's goals can be achieved through the developmental state assuming the business function.
But (and it's hard to believe it's 2011 and the point still has to be made) the notion that the government can create sustainable jobs of any description, decent or otherwise, is deeply flawed.
All it can do is appropriate capital from one part of the economy by means of taxation, and allocate it to another part of the economy that would otherwise not attract investment because the returns are too poor. Sometimes that is in the interests of society as a whole, such as when transport infrastructure needs to be built.
But often it is simply robbing Peter to pay Paul. There is an unquantifiable opportunity cost to extracting ever-increasing amounts from productive sectors of the economy and injecting them into those that cannot stand on their own two feet.
The government's claim to have "saved" thousands of jobs in the clothing and textile industry by using tax money to subsidise failing companies to the tune of billions of rand is a case in point. Who is to say that more sustainable employment opportunities would not have been created by the private sector had it not been taxed as heavily?
Businesses do not exist to create jobs. Jobs are merely a socially desirable byproduct of the search for profit. Similarly, as outlined above, the government's primary role is not to create jobs, it is to ensure that the business environment is conducive to companies being able to compete and operate profitably and thereby generate employment (and tax revenues!).
But the trouble with the ANC's approach to economic development, including the New Growth Path as it currently stands, is that it expects the private sector to buy into a model that is in many areas fundamentally anti-business.
Never mind, too, that most of the sectors identified in the New Growth Path as those where jobs will be created are currently shedding jobs, or that much of the legislative reform being introduced by the government at the behest of its partners will almost certainly result in job losses .
Complaining, as some commentators have, that business is not buying into this scenario is like accusing a turkey of being selfish and uncooperative because it declines to vote for Christmas.
Sooner or later it is going to dawn on the 40% of adult South Africans who cannot find work that their interests coincide with those of the private sector, and that the unholy alliance of left- wing ideology and patronage that is currently driving ANC policy is no friend of theirs.
Perhaps Mr Zuma has already discovered that and perhaps that discovery explains his remarks about private-sector job creation last Thursday night.
We hope business is ready to try to grab the ball Mr Zuma has dropped ever so gently into its court. It can still reasonably expect him to say more about what he needs in the coming days. And then, surely, a vital next step is a real summit between government and business to thrash out mutually supportive positions and to map out a way ahead.
*From: http://www.businessday.co.za/articles/Content.aspx?id=134334* ** ** -- You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. You can visit the group WEB SITE at http://groups.google.com/group/yclsa-eom-forum for different delivery options, pages, files and membership. To UNSUBSCRIBE, please email [email protected] . You don't have to put anything in the "Subject:" field. You don't have to put anything in the message part. All you have to do is to send an e-mail to this address (repeat): [email protected] .
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