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Building a Developmental and Entrepreneurial State

KIZITO OKECHUKWU | JULY 01, 2019

Photo: International business team with papers in city.

Recently, I heard a few stakeholders mention that South Africa should be an entrepreneurial state. The President also mentioned this in his recent parliamentary speech. Yet over the years, South Africa’s notion was to be a developmental state and now it seems to be moving to an entrepreneurial one. This led me to think what makes an entrepreneurial state?

There are so many metrics on how one can measure whether a state is developmental or entrepreneurial. One cannot write about an entrepreneurial state without thinking of Mariana Mazzucato, who argued in her book that the result of the USA’s economic success has been due to state-funded investments, innovation and the government’s role in leading industry developments. In the same light, one cannot ignore the thinking of the late Professor Chalmers Johnson who coined ‘developmental state’.

To summarize, a developmental state simply means the ability of the state to rapidly industrialize, control and develop policies that will foster the growth and development of its nation.

An entrepreneurial state basically looks at the ability of the state to build a knowledge economy, innovate, and also privatise key institutions that will enable the growth of the economy. Of most importance, is to become a risk-taker.

Which one is South Africa? Many argue that these terms have been politicised and there is no evidence that suggests we have achieved one or the other. The micro-governance issues being faced by municipalities (among many others) are evidence that the concept is misconstrued in our case, where some officials see flouting rules as being developmental.

The recent report by the AG on the calamitous state of most of the municipalities is quite incomprehensible and drew the fierce ire of most South Africans on a radio show last week. During my recent chat with some public and private sector representatives, many argued that the Public Finance Management Act (PFMA) is to blame for these problems because it is very rigid and does not consider the environment where many institutions and project operate from.

Whether entrepreneurial or developmental, our systems and actions are meant to be the empowering machines for our respective communities. Yet they’re having a crippling effect on many start-ups and SME’s within the entrepreneurial ecosystem, which are constantly experiencing infrastructural and other supportive challenges.

In relevance to the above, according to the ANC’s Jackson Mthembu piece just this weekend, “A capable developmental state requires effectively coordinated state institutions with skilled public servants who are committed to the public good and capable of delivering consistently high-quality services, while prioritising the nation’s developmental objectives”.

Moving on, I argue that South Africa can be both a developmental and entrepreneurial state and I have provided a few key points on how we can achieve this focusing on three key areas.

– Value Creation: This is one of the most important part of building a developmental and entrepreneurial state. Any work can create value, but one must ask, how much value? Value is created through an irreversible process which gives a resource greater usefulness to other humans. Manufacturing companies create value by acquiring raw materials which it uses to create an end-product that is valuable to the consumer. For a country to create value, it must first prioritise its people. People are the greatest value creators and we must build and change the mindset of our people to see value in themselves, while government works to build an ecosystem that can bring out the best in its people. The Porter’s value chain matrix thinks of primary and support activities needed to achieve this. The key thing is also looking into our primary industries, manufacturing, services and building human capacity that will build the country. The Human Capital can also be exported at a cost to other countries. Countries that has achieved greatness did that through the competitive advantage of human capital.

– Governance: Governance also needs to look at the condition of the state to govern its people. Its ability to develop policies focused on economic development and growth. Improved macro-economic conditions (create a stable economic climate of low inflation and positive economic growth). Free market supply-side policies – privatisation, deregulation, lower taxes, less regulation to stimulate private sector investment.

– Creating the Future: To create an entrepreneurial state, we have to be risk-takers and acknowledge that the future is always uncertain, although we believe that it will be bright. We must create the future that we want and build ecosystems that will make that future being realised. An entrepreneur takes risks and the state must be able to lead the creation of entrepreneurial thinking, actions, institutions and entrepreneurial capital. Though many will argue that this is a private sector role, the fact remains that private sector will only really engage when they believe that the state is leading the process. Risk-taking will always be a given; whether its investing in new innovation, providing capital for start-ups and driving growth, the state can play a pivotal role in the country’s development by risking its capital at a very early stage to invest in initiatives that could potentially generate wealth for the country.

To create an ideal state, it is healthy to dream big, but it’s crucial that we first fix the little things that can make a big impact on the future of our people, country and continent. Without building our human capital, we will not be able to achieve the desired economic value.

 Kizito Okechukwu is the co-Chair of the Global Entrepreneurship Network (GEN) Africa – 22 on Sloane is Africa’s largest startup campus.

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