JOHANNESBURG – The “trust gap” between the public and private sector has a detrimental impact on the success of public private partnerships (PPPs) and is a critical psychological issue that has to be addressed in order for South Africa to overcome its challenges, a former CEO of the Public Investment Corporation (PIC) has argued.
Speaking at an Old Mutual Investment Group Insights Conference, Elias Masilela, chairman of DNA Economics and part-time commissioner of the National Planning Commission (NPC), said there is insufficient trust between the two sectors.
“What that means is that the co-operation that takes place is not optimal and this is why PPPs are not as successful as we want them to be.”
South Africans should stop waiting for the next party to take the first step, Masilela said.
The National Development Plan (NDP) sets out the need for a social compact to ensure South Africa’s success. This requires that every member of society understands his or her role in taking the country to the next level, he said.
Addressing the constraints in the South African economy has become a critical issue as economic growth continuously lags forecasts and electricity supply and labour issues add to the country’s woes. While the NDP sets out a roadmap to bolster growth, eliminate poverty and reduce inequality, progress has been lacklustre.
Masilela said until the trust issue is addressed all practical attempts at progress will likely be constrained. Either the private sector will hold back on investment due to concern about regulatory changes or the government will hold back on incentives because it argues the private sector is too greedy and short-term in its thinking.
“Those are the challenges that we need to concern ourselves with. The practical issues then become much easier,” he said.
Rian le Roux, chief economist at the Old Mutual Investment Group, said at a high level the relationship between government and the private sector is “pretty good”.
However, in recent years government and the private sector have been at loggerheads about what the country needs.
Le Roux said while the private sector wants to operate in a free environment, government wants to impose more rules and regulations and this is sometimes where “things break down”.
But the private sector should also take responsibility for its role in the trust gap. If the private sector colludes and government has to pay more for contracts, it also affects the relationship, he said.
He was referring to a number of companies that have been fined for market power abuses around the construction of World Cup stadiums.
Other issues like tax evasion may also play a role, he said.
But amid a plethora of concerns that have to be addressed in order to really get the economy going, it is sometimes difficult to know where to start.
A report released by the World Bank this week highlighted three areas where South Africa can make an immediate improvement, Le Roux said.
The first is the relationship between government, business and labour, the second is fixing the country’s problematic labour relations and the third policy certainty, he said.
The latter issue is another reason why the relationship between the private sector and government is sometimes under pressure. The private sector cannot operate in an environment where there is uncertainty about the policy outlook, Le Roux said.