September
28
2010

Article by Futurist Clem Sunter. (Cape Times 28 September 2010)

Set up a venture capital fund of R100bn funded by big business and invest it in small enterprises with proven business experience and we will create wealth and jobs for the people, says futurist Clem Sunter in his latest scenario to help South Africa take the high road to success.

Funded by a once-off turnover tax on big business, this is one way to get ordinary people to do extraordinary things, and get people back to work, he adds.

In terms of his plan, Sunter says that the finance raised would then be spread between the provinces and administered by venture capitalists with proven small business experience. The large companies would each have a shareholding in the fund commensurate with their contribution.

Sunter, famous for his High Road, Low Road scenario while at Anglo American in the 90s, believes that the trade off for big business could be getting credit in terms of BEE points.

For example, the scorecard for banks would be amended to include points for setting up a small loan division and points on the volume of business executed. The same would apply to the JSE in terms of the number of small businesses listed.

The scorecard for big business would include percentage targets in their procurement programmes in terms of contracts with businesses below a certain size.

As for accounting firms, their scorecards would be revised to allow for a certain amount of auditing and accounting services for small businesses – coupled with lower charge rates and less stringent standards.

The scorecard for business schools, says Sunter, would reflect the amount of training and mentorship that they would do for entrepreneurs.

Rural communities would be allowed to set up local energy transfer systems whereby local citizens could barter goods and services between one another without having to pay VAT.

As an additional incentive to small businesses, they would be exempt from tax (except for VAT) up to an annual profit of R1m.

This, says Sunter, would immediately legitimize virtually all entrepreneurs as well as provide them with compensation for the risks they take – including the fact that they have to put their own money aside for a pension in old age.

The shortfall in tax would be met by introducing a graduated system of company tax similar to the one that operates for income tax.

And to make it easier for small business to create employment (and one arguably that would cause major problems with organized labour), Sunter suggest that laws should be simplified to allow small business owners to hire and discharge employees with more flexibility. This would not apply to households employing domestic workers.

Large agricultural enterprises would be encouraged to transform themselves into networks of small farms which could still achieve the economies of scale and efficiencies of the larger units, he reckons. Land distribution implemented in this way would not harm food security.

Campaigns to celebrate South Africa’s individual pockets of excellence would then be undertaken to create a bandwagon effect with the message that “if this person can do it, so can you.”

Looking back at the “High Road, Low road” scenario, Sunter points out that in the end South Africa put its faith in the common sense approach of whatever leadership emerged from a truly democratic evolution to a new South Africa.

Our faith, he believes, was not misplaced. “Despite all the faults we know about such as corruption, lack of service delivery, crime and an underperforming education system, the country took the political “high road”.

“Our economic growth has improved though it is still below the stated goal of 7 percent per annum. We are the largest economic player on a continent whose prospects have undergone a dramatic re-evaluation for the better with currency remaining strong, the stock market having performed better that most others internationally and government finances have been handled well.

“Our national debt to GDP ratio at 28 percent compares favourably with that of the US, Brittain, Italy, Greece and Japan – all of whom are now well above the recommended ceiling of 60 percent,” he points out.

But South Africa has failed in lowering the unemployment rate. Looking at the road ahead, Sunter believes that “if we take the wrong turn, all the good work done in the interim would come undone on account of a failure of economic growth.

“We would enter a phase of alternating dictatorial and populist regimes with the chance of being spun off towards a waste land placing us again at the crossroads.”


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