SOUTH Africa is heading towards too high a level of state intervention in the economy, South African Chamber of Commerce and Industry (Sacci) chief executive officer Neren Rau has warned.
The issue is being debated within the ANC, with delegates to the party's national policy conference earlier this year proposing greater intervention in mining and the creation of a state-owned bank and a state-owned construction company.
Rau suggested the state's primary role should be to address poverty and inequality, with participation in the private sector limited to acting as a facilitator and a provider of infrastructure, particularly for small businesses.
"Once you have a state entity entering a space where the private sector operates, the playing field becomes unbalanced because the state often serves as a regulator, so there's potential for conflict of interest there," Rau said.
"The state is not always compelled by the same private sector objectives. A state entity can run at a loss and it goes unchallenged, whereas if the private sector does the same, there'd be an uproar from shareholders."
Rau said many of the government interventions being implemented were not having the desired outcomes, citing black economic empowerment policies and proposed greater state intervention in the labour market as examples.
Standard Bank chief economist Goolam Ballim said the capacity of the state to govern, be accountable and deliver was an imperative. "Yet in the conversation surrounding South Africa's pursuit for a development state, there appears to be this denial about South Africa's very blatant incapacities."
More government involvement in major economic sectors would result in greater economic dysfunctionality and more job losses, according to Investment Solutions chief strategist Chris Hart. He said that in terms of world rankings, South Africa's private sector was ranked highly but this was not the case for the government. "We actually rank quite low, in regulation, education, health, etc."
Another factor that could make the state less effective in the private sector was corruption, which Hart said was rampant in the public sector. However, he acknowledged that the government's insistence that the blame should not be placed exclusively on the public sector had merit, as some elements within the private sector often resorted to bribing their way into government tenders.