Download The Investment Environment in Africa “Cutting Red Tape for

Strategic business partnerships
for
growth in Africa
GROWTH IN AFRICA:
A DEVELOPMENT MODEL THAT WORKS
and
A RELATED SET OF POSSIBLE RESPONSES
Growth in Africa is about going beyond
aid; it’s about identifying a suite of
possible responses for both the public and
private sectors
By Corin Mitchell: SBP South Africa,
www.sbp.org.za
Psi (private sector initiative)
Objective:To develop and expand the role of the corporate private sector in
African countries by increasing the business opportunities for local
businesses to participate in the pro-poor growth of the economy – as
a natural part of successful commercial operations.
The brief from the private sector – creating a network & platform:
• Develop flexible & innovative approaches to encourage sustained & thriving economic markets
around corporate operations in Africa
• Act as a catalyst to facilitate & encourage partnerships towards the common goal of developing
local economies
• Promote corporate citizenship profile by growing local economies through the advancement of
local suppliers & thereby helping to ensure increased prosperity
• Capture the learning & experience exchange for replication and regional roll-out
• Use this network and platform to inform national and local governments of barriers to business
growth
Psi structure & operational features
• Framework for companies to work collectively to advance local supply chain:
• CEO steering committee, the working group, facilitator
• Dialogue and engagement with local government/chambers
• Introduction of tools for spend mapping & tracking
• Development of shared SME supplier database (web-based)
• Adoption of a common rating system; quality, price & delivery
• Regular cross-sharing of supplier development strategies & mechanisms
• Advancement of CSR learning & image building
• M & E and impact assessment
• Captured learning for replication & knowledge dissemination
• Feeding into ‘Big Business’ in dialogue with Government
•In SA through various business associations and platforms
•In Tanzania through Confederation of Tanzanian Industries and the Investor Round Table
meetings
•In Malawi through the NAG and directly with Ministry of Trade & Private Sector
Development
Psi results & achievements
In SA:
• Since 1998 generated contract value of over R1 billion to the SMEs involved, 600 new SMEs introduced into
local supply chains, over 3,000 new sustainable jobs and.
• Now pioneering peer-to-peer SME networks linked into corporates and local government
In Tanzania:
• In 2001 initially 6 companies, currently 17 within the Psi network
• Direct procurement from Tanzanian SMEs in aggregate of
2002: $21m 2003: $30m 2004: $45m - an aggregate growth of 40% per annum
• High-level endorsement & buy-in from the Government of Tanzania, launched by Minister of Finance, a
platform for ongoing business dialogue with Government
• UN and DFID recognition of Psi as an innovative & pioneering model of corporate social investment to
achieve market-driven local economic growth
In Malawi:
• In 2004, 9 corporates signed into the Psi
• Endorsed and launched by the Minister of Trade & Private Sector Development
• Creating a practical platform for dialogue with government
Psi: Challenges & broader objectives
Bringing about systemic change:
•Winning the hearts-and-minds agenda
•Change management within the corporate private sector (CEO buy-in; measurement and line
managers)
•Roll-out regionally must be based on demonstration of practical success
•A highly effective basis for getting the ear of government
•Practical platforms for dialogue set up; business and government engage in positive and
substantive public-private dialogue
Sustainability & Localisation:
•Facilitation for limited time, no large cost-base set up in-country for the Psi. Private sector
funding ongoing in Tanzania, privately funded in Malawi with small DFID/BLCF grant
•If change management is effective, Psi methodology becomes locally owned
Cutting Red Tape (CRT)
SA compliance cost survey: Counting the cost of red tape for business
Methodology:
•
•
Large-scale survey: 1800 businesses from large corporations to survivalist SMEs
Core of survey: representative sample of 1108 formal sector firms; generated reliable quantitative
results.
- Supplemented by sectoral surveys, and survey of informal entrepreneurs
- In-depth vernacular interviews; frequent call-backs; accurate but expensive
Results:
•
•
•
•
•
Total gross compliance costs equivalent to 6.5% of GDP in 2004 (US$866 million)
Compliance costs highly regressive: burden on smallest firms 10 (or more) times heavier than on
largest firms.
Rapid regulatory inflation since democracy: i.e. nearly 3 times as many regulations in 2004 as in
2002
Cumulativeness & complexity are the key problems; and these problems are likely to grow as the
economy shifts increasingly into services
Tourism – a key growth sector - faces the heaviest burden
SA regulatory cost survey: outcomes
•
Government shifts regulatory policy to ease burden on business
- e.g. VAT and other tax systems simplified
•
Ongoing research and advocacy:
- tourism study; possible regional and other African country work
•
Improved business-government dialogue:
- substantive, evidence-based, politically (relatively) non-controversial
•
SBP-led investigation towards implementing RIA system for Presidency and Treasury
•
‘Lowering costs of doing business’ now top of political agenda
Platforms and dialogue
•
Private sector linkages work; national and local government/chambers and municipalities, large
companies and SMEs
•
CRT creates a focus for business and government interest in regulatory reform, increasing and
broadening this interest through research and evidence-based advocacy
•
Business was actively involved in the regulatory costs study and received the results
enthusiastically.
•
Business organisations used SBP’s findings for their own dialogue with government
•
The National Treasury invited SBP to present its findings to a specially convened meeting of senior
economists and officials
•
South Africa has a system for regular interaction between government and business – the
Presidential Big Business Working Group. Organised business brought these findings to the
working group for formal discussion with senior officials in key government departments
(Presidency, Treasury, DTI, Labour), organised business and organised labour
Platforms and dialogue
•
An important input into a new policy focus for government; ‘lowering the cost of doing
business.’ This focus was reflected in the 2005 Opening of Parliament Address and the 2005
Budget
•
Business and government are interacting on more detailed, sector-specific results of the
research, at another official tri-partite forum
•
The growing interest in regulatory good practice led to a decision by Presidency and National
Treasury to commission a study on the feasibility of introducing RIA into South Africa
•
SBP was commissioned to lead the work, under the guidance of a reference group under
government, business and labour – this provided a regular opportunity for government and
private sector interaction regarding regulatory good practice in general and RIA in particular
•
Through the reference group and other interactions, government demonstrated commitment to
hearing business’s views and taking their concerns on board
•
Overall, the research has provided a new dimension to business-government dialogue, based
on real evidence gathered from both business and government respondents.
Conclusion
The Psi creates exciting opportunities for
business-government dialogue on concerns
ranging from immediate practical issues to
the regulatory environment and the
investment climate