/ 6 October 2016

Maile ready to confront Gauteng’s growth challenges

Ahead of its elective conference on June 16
Ahead of its elective conference on June 16

Gauteng may be the economic hub of the country but much of the economy — across all sectors — is in the hands of no more than a handful of companies.

“We can’t do miracles,” said Gauteng MEC for economic development, agriculture and rural development Lebogang Maile.

Instead Maile has focused his department on the “micro factors” it has control over: growing, industrialising and modernising the Gauteng economy. Improving both the cost and ease of doing business in the province is another key objective.

The department recently launched the Gauteng Economic Plan, which has received backing from Finance Minister Pravin Gordhan, Deputy President Cyril Ramaphosa and Business Unity South Africa, among others.

Maile notes that the first thing the plan revealed was the concentrated nature of ownership in the Gauteng economy. Of the 11 sectors that they have researched, production was found to be from between four and eight firms, accounting for between 70% and 90% of that particular sector.

While the economy is diversified and has huge potential to propel growth, it has not been doing well, said Maile, but cannot be looked at in isolation without considering the national and global economy.

Maile points to factors such as the commodity price slump and the slowdown in global growth as things beyond the province’s control. But he also notes “external factors” that are controlled by government and points to — and uses the term — “Nenegate”, the seismic, market-shaking episode last December where President Jacob Zuma fired former Finance Minister Nhlanhla Nene and replaced him with back-bencher Des Van Rooyen before relenting and installing Pravin Gordhan in the post. He concedes that these actions have contributed to a negative policy environment that has seen the spectre of a ratings downgrade looming over SA.

The Gauteng government has a plan to revitalise township economies and one of the tools it intends to use is to procure 30% of its goods from enterprises based in these locations. The progress focuses on 104 townships occupied by Coloured, Indian and black African people and seeks to unlock spending which, although found to be low per individual household by Statistics South Africa’s General Household Survey, has huge potential because of the volume of households.

“The township economy is worth R100-billion, while the stokvel industry is estimated to be worth around R70-billion, says Maile, noting that the challenge is to make the money circulate in townships. 

“We are not saying big business, including retailers, must not go into townships, but we need them to change their model and source some of their goods from the township without compromising their standards” says the MEC.

This month will also see the launch of the country’s first Township Stock Exchange, a concept which Maile says is still embryonic and will develop over the long term. The idea is to pool the resources of investors who wish to invest in township enterprises and help these businesses raise funding to grow. 

“The idea is that we need an alternative to the JSE, which currently has a monopoly” he says, noting that in major economies, various cities have stock exchanges that provide completion. This is not the case in South Africa.

Maile claims they have managed to improve the application processes for various types of business permits, reducing the time it takes to pay service providers from the 30-day period that government has committed to two weeks. The MEC has instructed agencies operating under his department to reduce this even further to 48 hours.

The plan focuses on a number of strategic sectors, starting with the manufacturing and services sectors. In manufacturing, the province aims to pursue import substitution in the automotive sector to increase the proportion of locally manufactured components.

To bridge the skills gap the Automotive Industry Development Centre, an agency of government, has been roped in. The introduction of solar panel roofing, as well as the commissioning of power stations across Gauteng’s three metros, can supply the 1000 MW of power, which is usually the shortfall in Gauteng when Eskom goes into loadshedding.

The strategy will also see further investment to boost business tourism with the construction of two new convention centres in Tshwane and Ekurhuleni.

A key pillar of the strategy is to increase intra-Africa trade, which currently stands at 14% and rose from R512-billion in 2014 to R518-billion in 2015.