Opinionista Goitse Konopi 21 June 2017

Quest for transformation: SA government should help black-owned hardware firms

The political establishment and the security of the wealthy is at stake if those with vested interests do not reshape their thinking and consider the South African political economy from the perspective of a frustrated never-employed youth in 2017.

For some or other reason young South Africans are expected by the society at large to remain engaged in the democratic process, without really considering the emotional and psychological impact of experiencing economic marginalisation in a democratic society. It is essential that we all move beyond interest-fuelled rhetoric to a more solutions-oriented discussion.

From both sides of the Radical Economic Transformation (RET) debate, it is clear that urgent structural interventions are needed in order to ensure that some of the frustrations experienced by the increasingly growing youth population are speedily attended to. I may run the risk of sounding alarmist, but the reality is that the political establishment and the security of the wealthy is at stake if those with vested interests do not reshape their thinking and consider the South African political economy from the perspective of a frustrated never-employed youth in 2017.

The governing party in its economic transformation discussion document spells out the major challenges that are inhibitors to the nation’s growth and development. Early on in the document the ANC addresses the need to fundamentally transform the economy, by eradicating what is indisputable – that the South African economy is largely built on the exploitation of black labour. As part of the RET programme the ANC argues for the transformation of the traditional growth-driving industries of the economy.

Many of the ANC’s policy proposals and considerations have been spoken to in various public platforms and political fora. As it relates to my areas of interest, technology and public sector governance, not enough has been said. We continue to have conversations about RET, its meaning, along with its philosophical and ideological basis. The aim here is not to make a case for either side of the argument, but rather to provide a perspective that could drive the much needed transformation across the major sectors of the economy.

As part of the RET conversation, it is important that we remember that South Africa’s economic interests should be clearly articulated in the context of the global economy and its future prospects. It is imperative that restructuring measures as proposed also consider the importance of increasing the national research and development (R&D) spending.

In a recent conversation, a colleague and I reflected on the need for South African technology hardware companies to take up their space in government’s large procurement spend. The opportunities that arise from the fourth industrial revolution can in our context relate not only to the application of Artificial Intelligence (AI) technology, but could extend as far as mobile phones, laptops and smart devices.

The future is bright, but we need to consider the opportunities that are created in a low-growth environment. RET in my view can extend as far as every state-owned enterprise and government institution proactively purchasing hardware from government-funded, black-owned hardware companies. As the ANC heads towards its National Policy Conference, part of the policy considerations to be made for any new administration should include measures to capacitate the youth to not only participate in the periphery of the economy, but to create an enabling environment for South African built hardware products to rise from the ashes of what could potentially turn into a messy trade war between the China and the US.

As far back as 2012, the US House Intelligence Committee released a report titled “Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE” (Rogers & Ruppersberger, 2012). In essence, the report encouraged US-based telecommunication companies and government to avoid conducting any business with Huawei Technologies and ZTE Corp, as the US intelligence Committee viewed these companies to be a threat to “national security”, largely due to their perceived close proximity to the Chinese government. One of the recommendations from the report was that “U.S. government systems, particularly sensitive systems, should not include Huawei or ZTE equipment, including in component parts. Similarly, government contractors – particularly those working on contracts for sensitive U.S. programs – should exclude ZTE or Huawei equipment in their systems.” (Rogers & Ruppersberger, 2012)

Another recommendation of the report was that “Chinese companies should quickly become more open and transparent, including listing on western stock exchange with advanced transparency requirements, offering more consistent review by independent third-party evaluators of their financial information and cyber-security processes, complying with U.S. legal standards of information and evidentiary production, and obeying all intellectual-property 46 laws and standards. Huawei, in particular, must become more transparent and responsive to U.S. legal obligations”. (Rogers & Ruppersberger, 2012)

What is even more intriguing is that in 2015, the Chinese government responded by removing a number of US technology companies from its “list of brands approved for state purchases” (Carsten , 2015). At the time Reuters reported that the move came as a result of the revelations made by the polarising Edward Snowden, who exposed the US government’s large-scale global surveillance programme PRISM in mid-2013. This move enabled the Chinese government to remove Cisco, Apple, McAfee, among others from the approved state purchase list. As part of the process the Chinese government approved thousands of locally made products, which were included in the list of approved purchases. In both instances, it is evident that national security reason, whether or not legitimate, is expressed through the protection of both countries’ national economic interests.

If both the Chinese and US governments, which support the large-scale expansions of their domestic companies, can use “national security” to create an environment for protectionist activity, surely the South African government can assist black-owned hardware companies to rise and employ the many frustrated youths in the country. Such a move would require a clear and concise plan towards attracting the relevant skills, directing investment and tax incentives, as well as creating trade opportunities across the continent.

As part of the process of restructuring the economy, government’s programmes and initiatives should refocus their attention on creating and incubating black-owned businesses that will transition into large players in the economy. It is important that government moves away from working with rent-seeking businesses, and rather concentrates its efforts to support those black-owned companies that employ people and are built to last past individual contracts. DM

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