South African Minister of Finance Trevor Manuel said on Thursday evening that the modern world offered many opportunities for public finance innovation and for new kinds of partnership with the private sector and across national boundaries, but that getting it right meant keeping it simple.
“There are enormous benefits from getting these reforms right. But getting them right means keeping them simple, so that as reforms proceed we have more control, know more about what is going on, have a better understanding of how information is used and contributes to growth of the market economy,” said Manuel.
He said the government still hadn’t made enough progress in applying the progressing areas of economic inquiry into agency, incomplete information and the economics of organisations.
“I was having a discussion with Tom Boardman [Nedbank CEO] the other day. He said that earlier that day, he’d met with all 450 of his branch managers. There were people from across the country, a diverse bunch of people with different capabilities, competencies and approaches. But he could fit all these people into one hall and have a discussion on their concerns.
“He told me this story as he empathised with the minister of education who has 27Â 000 branch managers. We have 27Â 000 school principals in our country. We simply cannot get them all into a single hall or venue and structure a discussion in a sensible fashion.
“The transaction costs of engineering such a discussion would be enormous, even with modern IT and communications systems. And so we organise our schools into districts, regions and provinces. Information and perspectives are lost along the chain,” explained Manuel.
Manuel said that in modern complex societies, globalising economies, diverse communities, wildly differing bargaining strengths and imperfect markets, the role of government became incredibly complex and difficult.
“In taking decisions on even simple matters, the stakeholders, interests and factors that have to be taken into account require the Wisdom of Solomon. And I will be the first to admit that we do not always get this right,” he said.
Manuel said the prospects for successful management could be enhanced by improving the alignment between the accountability chain, institutional governance, managerial incentives and public policy objectives.
“Alongside these aspects of the internal organisation of public services, there are also challenges in the interaction of public and private sector arrangements, and in the interplay between national and international trends,” he said.
“Complexity is with us, and so we have to find a way through the barriers of misunderstanding. Unless work is done on the terms and conditions of agreements, and the appropriate financing or pricing arrangements, cooperation will not happen,” said Manuel.
“One simple idea that perhaps deserves greater currency is the idea of competition between service providers for a share of an agreed public resource envelope, based on defined measures of performance.
“A loan guarantee fund, or co-financing arrangement, for example, can be rationed between participating banks on the basis of agreed performance criteria — thus avoiding the overwhelming transfer of risk of failed schemes to the fiscus that characterises so many policy lending initiatives that have a redistributive or poverty focused objective,” said Manuel.
He concluded that in managing various kinds of public-private partnerships, and more generally in modernising the public service delivery, it was necessary to guard against unnecessary complexity. –I-Net Bridge