Demystifying Radical Economic Transformation - Pivot
Demystifying Radical Economic Transformation - Pivot



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Demystifying Radical Economic Transformation - Pivot

2017-06-07

The policy of radical economic transformation results in many requests to explain what this means for the economy and people of KwaZulu-Natal. In an exclusive interview for Pivot magazine, Mr Sihle Zikalala, MEC for Economic Development, Tourism and Environmental Affairs in KwaZulu-Natal was requested to unpack the goals of the policy.

Mr Zikalala says, “Our call for radical economic transformation should be properly captured. The background of the economy of South Africa is one which is characterised by historic injustice. We are coming from an era of 342 years of political oppression where African people were denied economic opportunities and social rights were oppressed.”

He says further, “We are at a time where we have agreed that South Africa is a rainbow nation, where we must coexist and live together in harmony. We can therefore not live in harmony while one neighbour is rich and one neigbour is extremely poor. As a country, South Africa is a global leader in inequality; we are trying to address that inequality.”

Of note, he said that economic transformation does not mean taking wealth from those that have wealth and distributing it to others. It means trying to change the structure of the economy by including those who were previously disadvantaged.

He added, “Through Operation Vula, which means open, we are opening space in the economy for cooperatives and emerging SMMES; as a result we are trying to address poverty in order to avert skewed economic growth.”

In this regard Mr Zikalala emphasized that radical economic transformation means that the policies and programmes that have been developed under the umbrella of ‘Operation Vula’, must be implemented. All government departments of the provincial government of KwaZulu-Natal have either developed or are in the process of developing an appropriate strategy to ensure that the programme has multiple points of entrance and effectiveness.

Mr Zikalala says, “When talking about Operation Vula it is important to understand that the programme has a number of focus areas. The first to be launched is RASET meaning radical agrarian social economic transformation, which talks to the value chain in the agriculture sector. Farmers need to supply food produce for use in services provided by government departments and land needs to be distributed more equitable to ensure that all people can participate in agricultural endeavours.”

Secondly, this strengthening process will be achieved by increasing the provision of a variety of services to local communities by local enterprises.

“Another sector is that of the clothing and textile industry. This talks to the opportunities that rise from schools; learners should be buying school uniforms from suppliers in their localities. The production of protective clothing, which is required for some of our local municipalities’ service departments, should be reserved for SMMEs. Local bakeries can provide bread for sandwiches,” says Mr Zikalala.

Consequently, the intention of Operation Vula is to ensure that money in circulation in townships and rural areas exchanges more hands before it leaves the community.

Mr Zikalala says, “Radical economic growth should be viewed as serving the needs of all South Africans, both black and white. It does not mean that we will be closing a company supplying goods and services and giving it to someone else to run. However, it means that we are opening a space for emerging entrepreneurs and ensuring that through the procurement processes and policies of the country all people will be allowed to participate. In this regard it means that 50 % of all government procurement spend should be ring-fenced for those who were previously disadvantaged in order for them to be integrated into the economic mainstream.”

Added to this requirement, government departments will have to procure goods and services within the area where a project is operational and will not be permitted to transport goods and services from outside that particular locality when they can be sourced from within.

A decision has also been taken to decentralise industrialisation in the province. The intention is for each of the ten district municipalities of the province to have at least one sector-specific industrial development hub located therein. Each hub will focus on an industrial sector in respect of the district municipality’s inherent and incontestable comparative advantages, which will provide opportunities for local entrepreneurs.

“Radical economic transformation also means integrating people who want to participate as entrepreneurs through ensuring that they now participate in key sectors such as manufacturing. Hence, through the black industrialists programme, entrepreneurs who want to enter the space of industrialisation will be assisted through the funding of feasibility studies, training and research as well as ensuring that they have startup capital. Once the enterprises are operational, these funds will have to be paid back to the government in order to ensure that the programme can continue to help others,” says Mr Zikalala.

The provincial development finance institutions (DFI) such as the KZN Growth Fund and Ithala Development Finance Corporation have been directed to prioritise projects that meet the Black Industrialists criteria as set out in the Department of Trade and Industry (the dti) policy. The DFIs are already playing a key role in appraising projects for co-funding as well as facilitating the process of applying for funding with the dti and other developmental funding institutions.

In this regard, training and skills development is essential; the Department of Economic Development, Tourism and Environmental Affairs is working in partnership with the Coastal KZN Technical and Vocational Education and Training (TVET) College to support SMMEs and cooperatives with their training needs. Furthermore, the province will be working with the private sector to identify supplier development opportunities for black industrialists. The intention is not only to equip entrepreneurs with training but to ensure that they enter the marketplace. Consequently, incubation programmes will be required in order to ensure that entrepreneurs not only obtain skills but are also equipped to participate in the economy in a sustainable manner.

Mr Zikalala says, “Incubation programmes, need to avoid typically weaknesses, they need to go beyond preparing an individual to be an employee but must look at business orientation. A six month programme of support is not sufficient in order to acquire the required technical skills as well as be equipped with appropriate business skills. A period of at least two to three years of support in an incubator is required. Once we see that a person has sufficient knowledge, skills and business acumen to run their own business in a sustainable manner we can then allow him or her to stand on their own feet.”

“We have young and growing population with a lot of potential who need to be supported through the policy of radical economic transformation irrespective of class, race, gender and spatial location. While the country has made a number of major strides to economically liberate our people, a large majority of them remain stuck in poverty. The change that is required to be implemented must go to the heart of the problem. It is about fundamentally altering the structure, system of ownership, management and control of the economy in favour of particularly poor South Africans. It is apparent that government cannot address the developmental challenges that the province face alone. Only a structured collaboration among government, civil society, the labour movement and the private sector will serve as a pillar of the provincial radical economic development process,” concluded Mr Zikalala.

(Read more about the radical agrarian social economic transformation programme on page 62)




Demystifying Radical Economic Transformation - Pivot

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