Economic Transformation: What role does Government play?
Ladies and Gentlemen,
Thank you for extending to me an invitation to speak at this event.
Allow me to congratulate the award nominees. Their achievements speak to the success of the transformation agenda we have pursued in these past 20 years, as we have sought to transform talent into excellence.
There can be no doubt that we have made progress.
I am told that by 2008, one quarter of the financial sector’s senior leadership and 38% of middle management were black, a figure that has no doubt continued to improve. Nearly R300 billion of the sector’s R3.5 trillion invested funds are managed by black investment firms and professionals.
As these changes have been underway, the sector has experienced a period of growth and stability. At R6 trillion in assets it is six times larger today than it was at the advent of democracy. In the context of an economy that has more than tripled in size since 1994, financial services’ contribution to GDP has increased by 38%.
The sector is far stronger today in the era of transformation than it was before. The sector’s growth, strength and stability is the result of prudent regulation, effective management of institutions and the leadership provided by professional bodies like Association of Black Securities and Investment Professionals (ABSIP).
As we reflect on the progress we have made, we can identify a number of areas in which ABSIP has made an important contribution.
Firstly, ABSIP has helped create opportunities for black stakeholders to participate in the sector as clients and professionals. The stewardship provided on the Financial Services Charter, which has served as the blueprint for achieving sector representivity, has been exemplary.
Under no obligation by law, the sector has spent over R200 billion on the imperatives set out by the Financial Services Charter, including in areas such as procurement and infrastructure financing. The sector has committed to spend an additional R100 billion over the next four years.
This has contributed to meaningful change in the lives of millions of South Africans. Today, two-thirds of adults have a bank account. This is a level of financial inclusion unheard of in Africa, and rare even among our emerging market peers. Our part as government is clear. We need to make sure that these gains are not lost, by strengthening the regulation of financial institutions to protect savings, ensure the fair treatment of customers and further promote inclusion.
Secondly, ABSIP has opened up opportunities for emerging talent to enter finance.
Several of the cadet training and professional mid-career programmes offered by banks are as a result of ABSIP’s intense lobbying efforts.
As a result, ABSIP cannot be described as merely a gathering of black people in finance. It is first and foremost a gathering of excellence. Looking back over the past 20 years, it is clear that a great deal of progress has been made in transforming the lives of citizens.
The average income of South Africans has increased by over 30 per cent. Five million jobs have been added to the workforce. Near-universal school enrolment and the steady increase in average years of education for both men and women have improved the life prospects of millions of South Africans. Access to basic services has grown steadily across the country, and more people than ever have access to housing, education and services.
Yet, although we have achieved much, there is still so much more to do.
The current economic environment highlights just how critical transformation is and how difficult it will be to achieve. Growth over the past five years has been well below the 6% mark needed to achieve the social mobility that must accompany transformation. The unprecedented twin deficit highlights not just our vulnerability to financial flows, but the reality that even the modest levels of investment in the economy are insufficiently financed through savings.
This vulnerability, together with the uncertainty associated with rapid technological change, means that our economic transformation effort faces several challenges. It is nevertheless an objective that we must relentlessly pursue.
Ladies and Gentlemen,
Transformation is an expression of the fundamental idea at the heart of the new South Africa – non-racialism.
It means building an economy whose structure reflects the demographic realities of this country. It means building an economy that serves the principle articulated in the Freedom Charter, that South Africa belongs to all who live in it, black and white.
Broad-based black economic development, skills development, supplier development and preferential procurement are parts of the package of measures we’ve employed over the past two decades to achieve this objective. These measures are important, but they are not nearly enough. We need to work towards radical economic transformation.
We need decisive interventions to reduce inequality, reverse apartheid geography, and inject competition into key economic sectors.
We need to invest in infrastructure and crowd in private investment. We need to reduce the regulatory burden faced by business and improve the quality of our education and skills training system.
We need to diversify our economic base and help local – and especially black – businesses to flourish.
We need to place the economy on a qualitatively different path that ensures more rapid, sustainable growth, higher investment, increased employment, reduced inequality and the deracialisation of the economy.
Radical economic transformation is not a programme of increasing the size of government and it definitely is not a programme of spending more borrowed money. But given the weakness of our economy and limited fiscal space we will have to make policy trade-offs. It is for this reason that we have dramatically increased the resources committed to public employment programmes, particularly for the Community Works Programme.
We have set up the Special Economic Zones to promote exports and employment in disadvantaged areas. We have given substantial funding to the Industrial Policy Action Plan to create labour-intensive growth.
And we have intensified our efforts to promote entrepreneurship through our allocations to the Small Enterprise Development Agency.
State-owned enterprises will continue to play a pivotal role in rolling out the massive infrastructure build programme. This sector will contribute to the expansion of power generation capacity, upgrades to the transport network, and improving sanitation and water provision. It will not only reduce capacity backlogs, but fundamentally improve the life of citizens.
Ladies and Gentlemen,
If we have learned anything over the past 20 years it is that government cannot drive transformation alone. Working together with all social partners is not only desirable. It is essential.
Progress will require more collaborative partnerships across our society. The National Development Plan provides a strong platform for such collaboration and the transition to a faster-growing, more inclusive economy.
As social partners, we need to focus on youth development. We need to reduce the burden of poverty. We need to harness technology and promote innovation. We need to finance and sustain our ambitious infrastructure build programme.
Let me conclude by reaffirming government’s dedication to the cause of empowerment. We shall continue to build a non-racial and non-sexist economy.
However, our capacity to transform the economy through legislation and spending alone is limited. We need the agreement and active involvement of all social partners if we are to build a stronger, more equitable and more vibrant economy.
Once again, we look to ABSIP to play a leading role in forging these partnerships and advancing these efforts.
We have the means to transform talent into excellence.
We have the means to move South Africa forward.
I thank you.
