Tag: economic growth

Source: Supermarket & Retailer

The opposition Democratic Alliance has tabled its Ease of Doing Business Bill which is aimed at cutting and reducing red tape associated with doing business in South Africa.

The private member’s bill specifically aims to deal Regulatory Impact Assessments (RIA) and the impact and cost that new regulations will have on the economy.

“Following a study into the lack of understanding of the full cost imposed by regulatory measures and the impact thereof on the economy, the South African cabinet in 2007 decided that a need exists for the consistent assessment of the socio-economic impact of regulatory measures.

“The presidency consequently issued guidelines on the conducting of Regulatory Impact Assessments in 2012, which guidelines provided for a Central Regulatory Impact Assessment Unit to be housed in cabinet under the deputy president in order to coordinate the development of Regulatory Impact Assessments.

“However, no clear compulsory measures were provided,” the DA said.

Why these measures are needed

Assessing the impact of regulatory measures, from policy through to delegated legislation, before a final decision is made to implement that regulation will improve the effectiveness, efficiency and impact of government interventions, the DA said.

It said that conducting an evaluation of regulatory measures allows:

  • The integration of multiple policy objectives and ensuring linkages of policies such as industry, competition, trade, SMME and B-BBEE, thus promoting early coordination of policies;
  • The enhancement of competitiveness by reducing regulatory burdens;
  • The increase of transparency and consultation when developing regulatory measures;
  • The increased involvement and accountability of decision-makers at the highest political levels when developing regulatory measures; and
  • A tool for policy monitoring and an evaluation benchmark for monitoring and evaluation processes although it is not synonymous with programme/project monitoring and evaluation.

“Specifically for developing countries red tape impact assessments have the potential to contribute to poverty alleviation by reducing business entry costs and creating a regulatory environment that is friendly to small businesses, thus driving economic growth,” it said.

It added that a number of countries including the United States, the Czech Republic, Republic of Korea and Mexico have similar rules in place.

“It is necessary for South Africa to entrench this duty in legislation as it allows for certainty, uniformity and the establishment of a central RIA unit.

“Legislation also allows for the involvement of parliamentary oversight over this important function.”

The DA said that the draft Bill provides for:

  • The establishment of a central administrative unit to manage the RIA process. It also provides for the fiduciary duties, functions, powers and reporting duties of the RIA unit. One of the functions of this unit will be to provide for assistance to businesses in overcoming red tape;
  • The evaluation of new regulatory measures. In this regard, the draft Bill places responsibilities on ministers, members of Parliament, parliamentary committees and self-regulatory bodies when developing regulatory measures. It also provides for the mapping of such regulatory measures to determine whether a RIA is required and if so, the process to be followed. The draft bill will also provide for instances that are exempted from these processes;
  • The evaluation of existing regulatory measures by Ministers and self-regulatory bodies. It further requires the development of a plan to reduce red tape and the costs thereof in existing regulatory measure.

Finance Minister Pravin Gordhan reckons South Africa’s economy will grow 0,9% this year; the World Bank plumps for 0,8% and the IMF forecasts just 0,7%. Woeful by global standards. And seriously dangerous for a country whose population, half of whom are under 25, is growing at 1,4% a year.

Warren Buffett wrote about the relationship between economic and population growth rates in this year’s letter to shareholders. The number of Americans is rising at 0,8% a year – 0,5% from births minus deaths; the other 0,3% from net migration. So although the US economy is expanding at a seemingly modest 2% a year, it’s actually a net positive of 1,2% annually for each person who lives there.

Doesn’t sound like much, but as Buffett explains “in a single generation of, say, 25 years, that rate of growth leads to a gain of 34,4% in real GDP producing a staggering $19 000 increase in real GDP per capita for the next generation. Were that to be distributed equally the gain would be $76 000 annually for a family of four”.

A lovely example of the power of compounding when economic growth is on the right side of population expansion. But inverting the two, as is happening in SA, delivers a warning worth heeding.

Failing to grow the economy fast enough to give youngsters the hope they deserve, is unsustainable. Even for the political party that brought liberation.

By Alec Hogg for www.fin24.co.za

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