Taking a few daunting steps in Pravin Gordhan’s shoes
by Kevin Rodrigues,
2016-03-23 05:55:49.0
ON A mild Cape Town Friday afternoon my leisurely stroll through Claremont was interrupted by a phone call from On Point PR, Nedbank’s PR Agency.
On Point PR is in charge of managing arrangements for the finalists in the Nedbank Old Mutual Budget Speech Competition. They requested that I write my own mini budget by the end of that weekend. In my blissful ignorance of the magnitude of the task and elation at the prospect of being on radio, I hastily agreed to take on the task. With a considerable lack of sleep, I submitted my rendition of what a 2016-17 national budget should look like by Monday’s deadline. This gave me but a taste of the mammoth task that Finance Minister Pravin Gordhan faced as he sat down with the National Treasury to compile this year’s budget.
Considering the contractionary monetary policy needed to quell SA’s present inflationary environment, the fiscus tightly squeezed for resources, rising national debt servicing cost, crippling drought and commodity prices at 10-year lows, it is necessary to acknowledge how well the budget was crafted. One could feel the tension in Parliament lift as the minister reached the end of his speech where he brought to the fore the need for SA to double its efforts to implement the National Development Plan (NDP), focusing on building infrastructure, improving education funding and supporting South African business.
There were definitely portions of the budget that would appeal to South African entrepreneurs at the more established stage of business development. The minister emphasised the need to build a strong mixed economy, and part of this process is the extension of SA’s public-private partnership programmes in infrastructure development projects. This is a necessary move from the government due to the prohibitive fiscal constraints, but also gives talented South Africans a foot in the door to launch renewable energy firms and build oil and gas infrastructure.
Another win for South Africa’s small, medium-sized and micro enterprises (SMMEs) was the focus on eradicating corruption and the enforcement of the mandatory use of the new e-tender portal. Not only will this encourage government efficiency, but it will also give small players an opportunity to make competitive bids and improve their chances against more established companies that may use their influence to sway decisions in their favour.
Along with this, the minister emphasised interventions that encourage tourism; provide funding and assistance to entrepreneurs in high employment sectors such as the mining and manufacturing sectors, where we hope to see a rise in black industrialists; and extend funding for the continuation of Operation Phakisa Oceans Economy Initiative. All of these initiatives are positive for South African entrepreneurs and primarily support new and established SMMEs. These interventions were capped with an emphasis on the need to reduce red tape at the regional and local level, including the need to address business regulatory concerns as outlined in the NDP.
Indeed, the 2016-17 budget was positive for local entrepreneurs and I wish the government the best with the successful implementation of the outlined plans. There is, however, one area that I feel requires government attention, which was not addressed. Despite the government’s best efforts to support the South African venture capital cycle through the Industrial Development Corporation (IDC), we still find that entrepreneurs are struggling for funding at the early, high-risk phase of business start-ups. This increases the barriers to enter and deters people from experimenting with ideas.
In the future, I would like to see the government getting more involved with these early-stage ventures. The ideal would be to have every university establish a business incubator such as the University of Stellenbosch’s LaunchLab, which can be funded and supported by the Treasury. There should be opportunities for business development specialists to form medium venture capital firms that are solely government funded to support early-stage ventures at seed and start-up phase.
Another ideal would be for the government to establish an entrepreneurial living grant that provides a reasonable living for a year or two to potential high-impact entrepreneurs, so they can free up time to attempt an entrepreneurial venture without worrying too much about whether their idea will generate cash in the short term. These grants should be given in collaboration with the private sector, purely based on the financial and market viability of the ideas. The individuals given the grants should be closely monitored for integrity and viability. This, I believe, will do wonders to chip away the 80% failure rate that occurs in the first three years of start-ups.
Aside from this specific area, there are always other areas that can improve, such as implementing less restrictive labour regulations. There will also always be a need for greater funding in more industries where there is an abundance of opportunity. This has to been addressed in SA’s vital NDP.
With all of this onus on the government and what it should do, it is necessary to look at ourselves as South African citizens and ask what our responsibility is. The government will never understand our own needs as well as we do, let us take the initiative to solve our own challenges wherever we can. Instead of asking the government to build our success, let us give them the opportunity to accelerate it.
• Rodrigues is a master’s student in risk management at the University of Cape Town and candidate fellow at the Allan Gray Orbis Foundation.
Pravin Gordhan. Picture: REUTERS
ON A mild Cape Town Friday afternoon my leisurely stroll through Claremont was interrupted by a phone call from On Point PR, Nedbank’s PR Agency.
On Point PR is in charge of managing arrangements for the finalists in the Nedbank Old Mutual Budget Speech Competition. They requested that I write my own mini budget by the end of that weekend. In my blissful ignorance of the magnitude of the task and elation at the prospect of being on radio, I hastily agreed to take on the task. With a considerable lack of sleep, I submitted my rendition of what a 2016-17 national budget should look like by Monday’s deadline. This gave me but a taste of the mammoth task that Finance Minister Pravin Gordhan faced as he sat down with the National Treasury to compile this year’s budget.
Considering the contractionary monetary policy needed to quell SA’s present inflationary environment, the fiscus tightly squeezed for resources, rising national debt servicing cost, crippling drought and commodity prices at 10-year lows, it is necessary to acknowledge how well the budget was crafted. One could feel the tension in Parliament lift as the minister reached the end of his speech where he brought to the fore the need for SA to double its efforts to implement the National Development Plan (NDP), focusing on building infrastructure, improving education funding and supporting South African business.
There were definitely portions of the budget that would appeal to South African entrepreneurs at the more established stage of business development. The minister emphasised the need to build a strong mixed economy, and part of this process is the extension of SA’s public-private partnership programmes in infrastructure development projects. This is a necessary move from the government due to the prohibitive fiscal constraints, but also gives talented South Africans a foot in the door to launch renewable energy firms and build oil and gas infrastructure.
Another win for South Africa’s small, medium-sized and micro enterprises (SMMEs) was the focus on eradicating corruption and the enforcement of the mandatory use of the new e-tender portal. Not only will this encourage government efficiency, but it will also give small players an opportunity to make competitive bids and improve their chances against more established companies that may use their influence to sway decisions in their favour.
Along with this, the minister emphasised interventions that encourage tourism; provide funding and assistance to entrepreneurs in high employment sectors such as the mining and manufacturing sectors, where we hope to see a rise in black industrialists; and extend funding for the continuation of Operation Phakisa Oceans Economy Initiative. All of these initiatives are positive for South African entrepreneurs and primarily support new and established SMMEs. These interventions were capped with an emphasis on the need to reduce red tape at the regional and local level, including the need to address business regulatory concerns as outlined in the NDP.
Indeed, the 2016-17 budget was positive for local entrepreneurs and I wish the government the best with the successful implementation of the outlined plans. There is, however, one area that I feel requires government attention, which was not addressed. Despite the government’s best efforts to support the South African venture capital cycle through the Industrial Development Corporation (IDC), we still find that entrepreneurs are struggling for funding at the early, high-risk phase of business start-ups. This increases the barriers to enter and deters people from experimenting with ideas.
In the future, I would like to see the government getting more involved with these early-stage ventures. The ideal would be to have every university establish a business incubator such as the University of Stellenbosch’s LaunchLab, which can be funded and supported by the Treasury. There should be opportunities for business development specialists to form medium venture capital firms that are solely government funded to support early-stage ventures at seed and start-up phase.
Another ideal would be for the government to establish an entrepreneurial living grant that provides a reasonable living for a year or two to potential high-impact entrepreneurs, so they can free up time to attempt an entrepreneurial venture without worrying too much about whether their idea will generate cash in the short term. These grants should be given in collaboration with the private sector, purely based on the financial and market viability of the ideas. The individuals given the grants should be closely monitored for integrity and viability. This, I believe, will do wonders to chip away the 80% failure rate that occurs in the first three years of start-ups.
Aside from this specific area, there are always other areas that can improve, such as implementing less restrictive labour regulations. There will also always be a need for greater funding in more industries where there is an abundance of opportunity. This has to been addressed in SA’s vital NDP.
With all of this onus on the government and what it should do, it is necessary to look at ourselves as South African citizens and ask what our responsibility is. The government will never understand our own needs as well as we do, let us take the initiative to solve our own challenges wherever we can. Instead of asking the government to build our success, let us give them the opportunity to accelerate it.
• Rodrigues is a master’s student in risk management at the University of Cape Town and candidate fellow at the Allan Gray Orbis Foundation.
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