Opinion: Co-ordination is key to lowering barriers
October 27, 2009
By David Lewis
The controversy surrounding the responsibilities of the economic ministries has distracted attention from the key role of intra-governmental co-ordination in ensuring policy consistency and the effectiveness of government programmes.
Governments are vast institutions with multiple and conflicting duties. They command incomparable resources, but confront unlimited wants. Decisions on the allocation of public resources must balance many considerations often impossible to weigh on the same scale. These difficulties are compounded by the need to attract and retain the skills to manage this level of complexity.
And if the task of managing the separate units and programmes of government is unspeakably difficult, then the complexity of organising them is near intractable.
But we do know that our government wants to build, and quickly, a "developmental state". It's a term used loosely, but it would not usually be thought to connote a large state. Current fiscal stimulus plans notwithstanding, those days are long gone, beyond the fiscal and managerial means of most governments. What is rather meant is a "smart state", one that can leverage activities through effective co-ordination, at least partly supplied by the government itself.
I recently punted an idea that accords with this notion of the developmental state. It does so through the medium of industrial policy, inextricably associated with a developmental state. It is associated with co-ordination difficulties because, by contrast with monetary and fiscal policy, it can't rely on a few powerful levers. It relies on the organised action of multiple public institutions and government departments.
The objective of industrial policy is to boost the competitiveness of South Africa's manufacturing base and lower the barriers to entry, the better to facilitate investment in new capacity. We know there are selected key inputs that sway competitiveness across the board. Foremost are finance, telecoms, energy and transport. What they have in common is a significant regulatory oversight and so they are susceptible to state intervention. But few of these bodies are in the silo that is the Department of Trade and Industry, the custodian of industrial policy.
A smart developmental state would focus on deriving competitive inputs from these horizontal sectors. But how to overcome the co-ordination snags at the heart of such a project? Mexico recently attempted this. It followed the example set years ago by Australia. It assembled a team of local and global technical experts tasked with identifying and ousting barriers to competitiveness in those sectors. The purpose is not to produce a report but to produce change.
And so the technical team engages with a cluster of ministers with appropriate line duties and directly tasked by the president with addressing competitive problems in these areas. I am convinced that this format - a dedicated task team of experts engaging with ministers clearly mandated and with the executive power to act on the outcome of the technical work - is the best way to ensure the co-ordination appropriate to the task in question.
Absent co-ordination and the key ministries and institutions will, at best, carry on bolstering their silos' walls. The debate on Comair's offer to buy Durban International Airport is instructive. The airport is due to close after the World Cup, leaving the city to be exclusively served by the R7 billion La Mercy airport owned by Airports Company South Africa (Acsa).
Comair believes it can operate the current airport in competition with La Mercy. I have no idea whether this is a serious offer by Comair or whether the price offered - R3bn - is competitive. But what does interest me, and what seems to vindicate Comair's offer, is the response of the transport minister and the chief executive at Acsa.
The minister says: "You can't have competition for La Mercy... It's such an expensive asset." Acsa's chief executive says: "When we say closing Durban International, we mean closing the aviation business." And while competition in this critical market is resisted, Acsa asks the regulator for a 133 percent rise in its tariff!
I don't question the view that Acsa is a well-run firm. But should a state-owned enterprise be required to maximise its return on invested capital? Does it not provide a better service to national competitiveness by providing its customers with the best service at the most competitive price? We will be told that the regulator will ensure this. But if competition is feasible then it is a far more effective instrument for ensuring this than is regulation.
Comair believes it can compete with the airports firm. Acsa and the minister don't want this at any price. They would rather close a well-established facility to maximise the return on Acsa's "expensive asset".
Would a cross-ministerial team tasked with improving South Africa's competitiveness through better co-ordinated use of state assets arrive at the same conclusion? I think not, because effective co-ordination rather than building stronger silos is what they will be measured on.
We had best start giving serious thought to better co-ordination as it may be the government's most vital contribution to better competitiveness. This will create jobs - decent jobs - in the medium term.
In the short term, public works programme will create jobs, but though needed, they will be neither decent nor sustainable. In the long run investment in education and infrastructure will make a competitive economy and good jobs. In the medium term, lowering the cost of doing business will do it. Improved co-ordination is a way to achieve that critical objective.
David Lewis is the former chairman of the Competition Tribunal and a professor at the Gordon Institute of Business Science
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