RANDS AND SENSE
By Deane Moore
In these turbulent times, where one global crisis follows another and our local economy is struggling, for many South Africans a comfortable and certain future seems out of reach. With consumer confidence crashing to its lowest level in three decades in the second quarter of 2022, there is a pressing need to reassure and reignite hope for a more sustainable and resilient future. But how can we unlock the collective financial, intellectual and developmental resources of our Rainbow Nation to facilitate this?
Boasting a young population compared to developed countries, with an average age of just 28, South Africa is a country of big thinkers who have performed well on the global stage. Companies such as Naspers, Rembrandt and SA Breweries, and individuals like Mark Shuttleworth and Patrice Motsepe, to name a few, have demonstrated our wealth creation capabilities.
Hindering our progress are challenges such as an education system that ranks poorly on maths and science competencies, protectionist policies that create obstacles to job-creating commercial enterprise, and inefficient administration and licensing of professionals in many industries, such as health care and engineering.
Take-aways from across the ocean
There are many international lessons that can be learnt to help overcome these stumbling blocks. For example, in China, according to the World Bank, 850 million people have been lifted out of extreme poverty. This was partly by controlling where commercial licences were issued to promote industry development and job creation in poorer rural areas.
Ireland reversed its trend of exporting human capital by providing tax breaks for research and development intensive start-up enterprises and effectively becoming Europe’s Silicon Valley for technology companies.
The onset of Covid-19 also demonstrated that, while perhaps not always easy, it is possible to sell services from anywhere in the world.
But how can we enable SA’s potential – and remove obstacles – to take advantage of global opportunities?
Boosting the youth
We need to provide our youth with improved access to higher-quality education and easier access to finance and to global markets. We also need to provide them with a safety net that encourages entrepreneurial risk-taking, which should enable successes for the country by reducing risk for the entrepreneurs themselves.
This will require the government to consider several macro-issues on a more holistic level. As in the case of the international success stories, it would seem logical to use tax breaks and licensing for both local and global investors to develop commercial enterprises in “development zones”, and to link these incentives to job creation and training. Over and above this, increased spending and focus on education that allows our youth to compete globally is required.
Role of the insurance industry
The value of insurance comes from replacing a large uncertain loss with a small certain cost that can be budgeted for. This could prove valuable in creating better access to finance and a safety net to allow for entrepreneurial risk-taking – serving effectively as entrepreneurial insurance. While there are already some private wealth venture capital funds actively doing this, the threshold for such access is set too high to have mass impact.
Furthermore, South Africans could greatly benefit from public-private partnerships to promote financial inclusion by lowering the threshold for access to finance, together with well-developed risk management models. These partnerships could provide the necessary insurance skills to assess and determine “insurable risks”, as well as provide access to global markets, enabled through the country’s large multi-nationals, not to mention ongoing commercial support through entrepreneurial mentoring.
How to protect your income
At a personal finance level, it is important for people to use their financial resources wisely, and for long-term savings to be encouraged – which, in turn, provides pools of finance for long-term entrepreneurial projects.
At Just SA, we believe in the guiding principle of protecting your income and building capital. This can be achieved by ensuring that you have life and disability cover to protect against life’s adverse events and by saving a portion of your income in a long-term savings vehicle to fund your retirement. Further, by investing in property, the income you pay towards your accommodation is invested in a long-term asset.
Deane Moore is chief executive of Just SA.