The government’s current system is imprecise, opaque and difficult to implement
Here are some good rules for the development of any government policy: take input from people in the sectors that are most affected. Actually listen, rather than going through a box-ticking exercise, and when you have made a decision, publish a report explaining why you took the path you did. The decision you take must be supported by the evidence you gathered.
But this won’t easily happen because South Africans have largely decided to allow the government to decide how we live. The president’s social compacting became a few master plans, which have now broken free from the department of trade, industry & competition and become the many masters’ plans from all over the government. Even in the hands of the most competent government in the world, this would still lead to suboptimal outcomes.
What does that mean? At first it meant the cement had to be made with 100% locally sourced clinker, but soon after the policy was published, the department remembered there are local cement producers that manufacture cement from imported clinker and would now be prohibited from supplying the government; cement producers that, ironically, had benefited from tax incentives approved by the very same department that now wished to exclude them.
Designation therefore benefits the companies that know how to get into the secret room, rather than those that are most deserving. It becomes a mechanism to create oligopolies. This was what the Nats did during the apartheid era. Sanlam. Santam. Volkskas. The list goes on. Tremendous market power accrues to those who understand how to get into that room. It soon becomes a public-private cartel.
Designation is complex. Sometimes industries are designated and sometimes products , but these are not connected to tariff codes, so how can imports be monitored? When we talk about cement, do we mean only Portland cement, or do we also include tile cement? Grout? Because designation is so imprecise, it becomes extremely difficult to practically implement, especially if the product only has partial local content requirements.
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