Whatever President Cyril Ramaphosa’s legacy might be, economic growth isn’t it. Growth is not yet our political obsession. That much is true in the way it is mentioned with caveats by politicians and policymakers. “We like growth, but can we make sure it’s more equitably distributed?” some in the government say. It’s expressed tangibly in things such as localisation and transformation, which are then being entrenched in the awful new procurement regulations.
Now, before the “growth doesn’t measure welfare” crowd reach for their pitchforks, let me say that yes, of course we should worry about such slippery concepts as happiness and the subjective wellbeing of people.
In fact, there’s an excellent quote by Simon Kuznets, the economist who coined the term gross domestic product: “The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP … Goals for ‘more’ growth should specify of what and for what.”
But the point is actually pretty simple. Worried about the environment? Fair enough. Now ask yourself why richer countries generally have cleaner rivers, better waste systems and fewer people burning whatever they can find just to keep warm.
Want properly educated citizens? Excellent. But who is more likely to afford decent schools, good teachers, functioning universities and textbooks that actually arrive before the matric exams: a wealthy country or one permanently rattling the begging bowl?
Hate the idea of people going hungry? As you should. But again, where is grinding hunger more common: in countries with productive economies, rising incomes and functioning tax bases, or in countries where growth has been missing in action for a decade?
You can run this exercise all day.
Economic growth is not the only thing that matters. Of course it isn’t. But unless your preferred economic model involves everyone becoming equally poor in the interests of fairness, growth gives you the money, capacity and breathing room to start fixing all the other things you care about.
It is much easier to debate the quality of the national cake once there is actually a cake.
Growth buys choices
Now back to the Public Procurement Act, which has not yet been brought into operation; the regulations are intended to make commencement possible. The Constitutional Court heard the procedural challenge to the act on May 18 and 19, but no judgment has yet been published. Meanwhile, comments on the tribunal regulations closed in May and for the general regulations on July 15.
The promise of reforming public procurement should have been premised on making it harder to steal and ensuring taxpayers get bang for their buck.
But, in a recent interview on Classic Business, Bowmans procurement law specialist Busisiwe Nhlapo warned that the draft regulations risk becoming “overly prescriptive”, imposing “rigid, minute details” on institutions with vastly different procurement needs and, in doing so, undermining the flexibility the constitutional framework was meant to preserve.
That phrase rather neatly captures the problem. A country desperate for investment, infrastructure and faster execution is legislating rigidity into the machinery through which the state buys almost everything.
The set-aside provisions illustrate the danger. Nhlapo pointed out that for procurement above R20m the regulations envisage at least three potential qualifying suppliers, yet fail to prescribe how an institution must establish that such a supplier market actually exists. In specialised sectors, she noted, there may in reality be only “one or two qualifying suppliers” with the technical capacity to do the work. The government cannot regulate a competitive market into existence. If only two capable firms exist, pretending there are three does not manufacture capacity; it risks excluding it, shrinking competition, and ultimately pushing up the price paid by taxpayers.
That makes the unresolved relationship between preference and price even more troubling. Nhlapo said the regulations “absolutely have to be clearer” about how preferential procurement criteria interact with a value-for-money assessment, calling this one of the gaps Bowmans had specifically raised with the National Treasury.
In an economy starved of infrastructure and productive investment (our gross fixed capital formation, the money we invest in the bricks and mortar of the real economy, is on par with Afghanistan), value for money is a growth issue. Every rand unnecessarily absorbed by a badly designed tender is a rand not spent on another kilometre of road, another substation, another water project or another classroom.
The government should know this by now. We have spent years conducting increasingly elaborate arguments about how the proceeds of growth should be divided while displaying a rather less urgent interest in producing the growth itself.
None of this means GDP is the only measure that matters. It plainly is not. Clean government matters. Education matters. Health outcomes matter. Social mobility, safety, dignity and the environment matter.
But economic growth is what buys governments choices. It creates jobs, broadens the tax base, attracts investment and gives a country the fiscal room to pursue all those worthy objectives without funding each new promise by squeezing an ever-smaller group of taxpayers a little harder.
You can care deeply about things other than growth. You probably should. But first it helps enormously to have some.
