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How Covid-19 crisis can be turned around to restructure SA economy

The banking sector, just like many others, is largely concentrated in the hands of the big five banks. There are calls to break up the oligopolies to allow for more players in the economy.
The banking sector, just like many others, is largely concentrated in the hands of the big five banks. There are calls to break up the oligopolies to allow for more players in the economy.
Image: Papi Moake/ Gallo Images

How should South Africans use Covid-19 crisis as a vehicle to restructure the economy to benefit black people?

This is the question black professionals and entrepreneurs debated in a recent webinar which sought to find answers on the means to measure the impact of Covid-19 on economic transformation in SA.

Black Management Forum deputy president Tasneem Fredericks, who was one of the panellists, believed that Covid-19 should be used as an opportunity to restructure the economy to benefit the majority of the citizens.

"We are grappling with a country where we are the demographic majority but we are the economic minority. We have transformation that is legislation because there is unwillingness from the private sector and white South Africans to embrace transformation.

"Black people are not asking for a handout but ... need access to opportunity and capital. But unfortunately, banks don't bank ideas. They give you finance based on bankable assets, like land, because we are in this systemically racist and exclusionary economic system," she said.

However, this view was not shared by Fredericks's fellow panellist and Mobax chairperson Vuyani Jarana, who said Covid-19 shouldn't be used as an instrument to restructure the economy.

"When you're facing a crisis as we are facing, the battle is about recovering the economy as quickly as you can and any other consideration tends to be less important than getting the economy back. 

"If you think Covid-19 is going to be an instrument for restructuring the economy, I think we are missing the point," he said.

Jarana said the economy could be transformed by having dominant industry players to share the slice of the cake.

Many sectors in the SA economy were concentrated in five big companies and this closed space for smaller players to benefit from the value chain, he said.

"The first thing is to push hard ... to allow the big guys to push them and incentivise them to dis-aggregate the value chain so that they create space for start-ups and mid-market players to provide services in a resilient way. SA has five big banks, Kenya has 30 banks while Nigeria has many banks," he said.

Other panellists of the webinar, organised by Black IT Forum, were the forum's president Motse Mfuleni and Kganki Matabane, the chief executive of Black Business Council, while Sowetan editor Nwabisa Makunga was the moderator.

Mfuleni raised concerns about organisations that tried to force government through the courts to suspend transformation laws due to Covid-19.

However, court challenge against tourism and small business ministries failed.

"But unfortunately, a lot of us black businesses and professionals, including our political leaders, were quiet. Those ministers were left to hang but were vindicated when the courts found in their favour," he said.

"In short, the struggle is real and there, it's not yet uhuru. We need to find a way to take advantage of the new environment to reset the (BEE) codes and come up with a new economic model that can be implemented and ensure there is equality d economic transformation to happen.

Makunga asked about structural issues that inhibited black entrepreneurs with excellent ideas from growing their business, like access to finance.

Mfuleni said formal finance institutions were battling to understand business plans of ICT companies as they believe they are too risky.

He said the Independent Communications Authority of SA required broadcasters and telcos to contribute to a fund managed by Usasa.

"Maybe we must start by engaging on the usage of that fund so that it's ring-fenced for emerging SMME innovation ideas," he said.

He said it was also concerning that state-owned funding institutions did not also understand the work of ICT entrepreneurs.

Jarana also took issue with the Reserve Bank's Monetary Policy Committee when it only reduced interest rates by a whopping 250 basis points due to the Covid-19 economic crisis.

"Pre-Covid-19 we saw high interest rates, economy going into recession, high unemployment and rising debt levels. All those things show the structure of the economy is highly concentrated."

He said the MPC left interest rates high at a time when many thought they would be lowered to give consumers and businesses debt relief.

"If you release a bit of liquidity (cash) into the economy you are creating an opportunity for people to invest, if you hold too much it's a disincentive for investment." he said.

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