President Cyril Ramaphosa has called on the beleaguered local government sector to implement red-tape reduction reforms to unlock local economic development and create space for small businesses to flourish.
He criticised backlogs in issuing business licences, saying they prevent micro-enterprises from accessing government support.
“Cutting red tape is crucial both to attract large-scale investment and to enable informal traders and small township entrepreneurs to succeed. Some of our cities and municipalities have done well in improving the ease of doing business,” he said in a keynote address at the national local economic development summit in Boksburg, east of Joburg, on Wednesday.
Ramaphosa said bureaucratic delays at municipal level prevented local investments from getting over the line.
“As we finalise the Business Licencing Bill and roll out the red tape reduction framework, we call on local government to drive its own red tape reduction reforms,” he said.
Ramaphosa appointed former Exxaro CEO and mining executive Sipho Nkosi to head a dedicated team in the Presidency to cut red tape. The team focuses on simplifying and reducing burdensome regulations that hinder business growth, particularly for small, medium and macro enterprises.
During the state of the nation address in February, Ramaphosa said the government would be implementing measures to reduce red tape in priority areas, including the mining rights system, tourism transport operator licences, visas and work permits, early childhood development, and the informal sector.
Ramaphosa said South Africa’s entrepreneurship ecosystem was dogged by a crisis of funding, lack of skills training, bureaucratic barriers and limited integration into larger value chains, while persistent challenges within local government continue to constrain economic opportunity and potential.
There was an urgent need to fix the local government sphere to unlock local economic development.
He said local government was the engine room of development, and as such, “metro, district and local municipalities must see themselves as incubators of economic activity”.
“When an entrepreneurship culture is strong and supported in cities and towns, it contributes to job creation and small business development. South Africa has a burgeoning entrepreneurial sector that continues to increase its contribution to economic activity and job creation,” he said.
The summit is taking place two weeks after the government held the sixth South Africa Investment Conference, which secured a record R890bn in investment pledges across all provinces.
On the local government sector, which lost R17.6bn over the past three years to fruitless and wasteful expenditure, Ramaphosa said the auditor-general’s report on the sector highlighted persistent weaknesses that undermined service delivery and constrained local economic development.
These included weak financial management and revenue collection, failure to maintain infrastructure, ineffective supply chain management, irregular and wasteful expenditure and weak consequence management.
Ramaphosa said these challenges translated into unreliable electricity, water insecurity, poor roads, poor service delivery and unsafe trading environments.
“Without fixing governance, we cannot fix service delivery, and without fixing service delivery, we cannot unlock local economic development,” he said.
Service delivery constraints needed to be unblocked at the local government level, especially regarding basic infrastructure, as “energy security, water provision, roads and rail lines are the foundation of growth”.
“We have made much progress in tackling load-shedding and improving the efficiency of our logistics sector. This summit must now translate national progress into local success.”
Ramaphosa said it was a “major concern” that the government had not adequately prioritised infrastructure maintenance. The sector needed to improve debt collection and revenue management systems and leverage private investment for infrastructure.
Bheke Stofile, president of the SA Local Government Association (Salga), the employer body representing the country’s 257 municipalities, said: “We must reject the dangerous misconception that economic development is solely the responsibility of national government. This view is politically misguided, constitutionally weak and economically detrimental.
“Local government is not a passive observer in the developmental discourse. Municipalities govern land use, roads, electricity, water, planning, trading spaces, waste systems and the daily conditions that either enable or stifle livelihoods.
“Excluding municipalities from economic considerations is a fundamental misunderstanding of development. Development occurs through building productive capacity.”
Stofile said genuine local economic development (LED) must encompass agriculture, agro-processing, manufacturing, logistics, renewable energy, tourism, infrastructure, supplier development, and local value chains.
“LED means producing more, processing more, trading more and owning more of the local economy.”
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