The country’s fiscal balance and growth prospects lie in private sector led growth. It is imperative that we get this right to ensure that we attain broad-based and sustainable growth. The nation has long depended on State-led initiatives and donor-driven programmes. While these have delivered tangible outcomes and propelled the country into a new dawn, sustaining these gains requires a vibrant private sector. In the long-run growth is driven by innovation and improvements in productivity and the private sector is the right sector to lead and tap into these growth avenues. It is, therefore, prudent that we invigorate our private sector led growth model with a few tweaks so that an enabling environment for private sector is created and sustained.
Why private sector-led growth
The nation is confronted with a problem of burgeoning unemployment and to deal with this problem we need a vibrant private sector to create jobs. Government programmes and State-owned enterprises can only produce a limited number of jobs, however, a thriving and growing private sector can create more jobs and absorb emaSwati. This will invariably expand the tax base through income taxes and corporate taxes, improving the kingdom’s fiscal sustainability. The consumption multiplier will also come into effect once the jobs have been created and the private sector purchases will continue to drive consumption and investment expenditures in the kingdom.
Interim
In the interim government purchases and fiscal stimulus remain pivotal in providing a short-term market base for the private sector to grow. However, the arrears need to be eliminated pushing cashflow to the private sector to fund growth. Government arrears to the private sector are tantamount to a private sector subsidy to government. The reverse ought to happen, the private sector should not be forced to subsidise the public sector. The Treasury payment system must be streamlined and reformed to ensure that payments are done expediently. Government is urged to prioritise payments to the private sector to improve the potency of government spending and the fiscal multiplier. Another reform that is crucial is competitive State-owned enterprises (SOEs).
SOE competition
My stance adopts a middle ground posture, I will not push as far as full privatisation, but SOEs should compete on an equal footing with private sector. Government should remain a shareholder, but a silent one and we could also allow private players to buy shares in the private sector, but not a controlling stake. Government should retain a controlling stake. The role of SOEs is pivotal in providing backbone infrastructure through investment in avenues that have a huge upfront cost. However, their role should be a strategic one, where they strategically setup the field for private sector to thrive. Once private sector has grown, SOEs should take a back seat or compete with private sector at an equal footing. SOEs should focus on sectors where there are market failures to bridge the gaps, while private sector players find innovative ways to deal with those failures. Crucial to attaining this goal is strengthened regulatory environment. SOEs participating in a competitive environment or with a private sector equivalence should be made to compete at an equal footing with the private sector.
Corruption and governance
It is imperative that we deal with the problem of corruption as a country. The private sector suffocates in a corrupt environment, private sector requires a stable and predictable environment to thrive. Corruption is an additional tax burden on the private sector and increases the cost of doing business eating into the price competitive edge of private sector. Furthermore, it hinders competition as those with the muscle and will to pay the additional 10 per cent are not forced to compete with others besides paying the 10 per cent. This results in a situation of adverse economic selection in the sense that the only players that thrive are those that are inefficient and corrupt. Also, in terms of direct foreign investments corrupt destinations attract corrupt foreign direct investment (FDI) further hindering growth and expansion of the local economy.
Critical investment areas
Private sector-led growth in the kingdom will be fruitful if investments are strategically directed at these critical areas. Firstly, policy and regulatory reform is essential to simplify business registration and licensing, ensure transparent and predictable regulations, and strengthen property rights and contract enforcement, thereby lowering the cost of doing business. Secondly, sustained investment in infrastructure, particularly reliable energy, transport networks and ICT systems supported by well-structured public–private partnerships, will unlock productivity and crowd in private capital. Third, access to finance must be expanded through stronger SME credit facilities, financial innovation such as mobile banking and microfinance and deeper capital markets to support long-term investment. Fourth, investment in skills and human capital is vital, including aligning education with labour market needs, expanding vocational and entrepreneurship programmes and strengthening university-industry linkages. Finally, sectoral diversification should be prioritised through agro-processing, tourism, light manufacturing and the digital economy to broaden the growth base and create sustainable jobs.
In conclusion, getting private sector-led growth right will unlock jobs, strengthen fiscal sustainability, boost productivity and secure inclusive, long-term prosperity for the kingdom.
The country’s fiscal balance and growth prospects lie in private sector led growth.