/ 24 April 2008

DA proposes six steps to weather economic storm

The Democratic Alliance (DA) on Thursday proposed six steps to help the economy weather the current storm.

”Overall, sustainable and consistent policy is required,” DA spokesperson Kobus Marais told a media briefing at Parliament. ”Reverting to knee-jerk, short-term and populist measures will do more harm than ever before,” he said.

Firstly, private-sector involvement in infrastructure has to be increased through accelerating privatisation and public-private partnerships (PPPs).

Increased reliance on private infrastructure improves efficiency, promotes innovation and enhances services, he said.

Network utilities should be unbundled, with different owners for potentially competitive components and natural monopoly components.

The money generated and saved through privatisation and PPPs, respectively, would substantially reduce the financial burden on the government.

Secondly, the government should urgently take steps to reduce the Eskom monopoly and encourage greater competition in the electricity sector.

These measures, which would help facilitate the entry of independent power producers into the market, include unbundling generation from transmission, revoking Eskom’s designation as the single purchaser of electricity and reducing Eskom’s market share in generation.

Thirdly, labour markets have to be freed up and the skills crisis addressed.

South Africa’s ”narrow” unemployment rate of 23% is alarmingly high and the broad definition of unemployment at 36% is reaching crisis proportions. With unemployment at such high levels, the government’s priority should shift towards job creation.

The Basic Conditions of Employment Act should be modified to allow customised contracts between employees and employers to vary the minimum-wage sectoral determination. This would encourage discouraged workers to ”re-enter” the labour market and make it easier for aspirant workers to enter the job market.

Practical steps to attract skills include issuing work permits as a matter of course to economically active, skilled foreigners with tertiary qualifications wanting to live and work in South Africa, and fast-tracking skills migration to South Africa.

Fourthly, Marais said industrial development zones should be converted into fully fledged export-processing zones.

Labour-intensive industries should be encouraged; new ventures should enjoy a sustained tax holiday; duty-free imports of machinery, equipment and raw materials should be allowed; legislated minimum wages should not apply; and the full repatriation of profits and capital should be permitted.

Fifthly, the ability of small, medium and micro enterprises to contribute to job creation and economic growth need to be enhanced by making it easier for entrepreneurs to start a business and gain access to finance.

Finally, in responding to rising prices, a two-tiered long- and short-term approach is necessary.

Specifically, the state should boost food supply and security in the long term, while alleviating the harmful effects of rising food prices on the poor in the short term through targeted assistance like food vouchers, Marais said. — Sapa