The only way to solve the unemployment problem is through small business

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State-owned enterprises, through procurement and creation of jobs, would be used as a tool to promote black empowerment and employment equity and ensure that a ceiling above the heads of black people was removed, Gigaba argued.

He said: “The challenge of economic transformation is not simply that you need growth in the South African economy of 7 percent per annum… it is you need to remove the glass ceiling. You need to remove the barriers to entry to property ownership and to reconfigure the property relations in a manner that allows the majority to also participate in the economy.”

But Hart doubted whether there was much of a role for the state in running businesses. While recognising that poverty and unemployment were “national emergencies”, he said other problems in the economy would be solved if the right policies corrected the two main problems.

There was a tendency for state-run businesses to be undercapitalised because the state allocated capital for other pressing social needs.

Monopolies either in the private or public sector were inimical to growth. South Africa had a problem of big business dominating economic sectors that led to anti-competitive practices and in the public sector to “erratic” pricing.

“The state-owned enterprises are part of the big business problem. If you restrict the size of an industry in a country like South Africa, which needs industrial expansion, it is harsh especially for the unemployed. The only way to solve the unemployment problem is through small business… to create a massive employment boom,” he said.

Yet the growth of small business was restricted by a battery of regulations applying to starting up and running small businesses. While the Competition Commission policed monopolistic practices in the private sector, it did not do so in the public sector.

“Regulations should be enabling so that your markets can be more efficient. Free markets produce abundance,” he said, noting that “cronyism”, oligopolies and collusive practices shut out economic growth. If a government felt it had to run a business, it should not create rules preventing the private sector from entering markets.

via SA needs a mixed economy – Gigaba – Business News | IOL Business | IOL.co.za.

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