SA’s tech and healthcare businesses play pivotal role in driving growth

_{By: Kevin Lings, STANLIB’s Chief Economist}

As South Africa and the world recover from COVID-19, the first requirement for a healthy economy is healthy people, which leads to a conversation about vaccines. Aspen Holdings, which is manufacturing millions of Johnson & Johnson (J&J) vaccines for SA and the rest of Africa, is determined to ensure that Africa does not fall behind in the race to vaccinate the population.

While vaccination is critical to the health of the content, it has also highlighted the importance of building up the continent’s capacity and capability, starting with technology transfer. This approach is supported by French President Emmanuel Macron, who has championed patent waivers that will enable the continent to obtain vaccines more easily so it can unlock growth and development opportunities.

Big business collaborates with SMMEs

One of the lessons learnt from the pandemic was that collaboration and agility enabled SA’s big businesses to survive and thrive through Covid-19 and the lockdowns. These attributes are essential to grow the economy and require big business to think beyond existing constraints.

Here media giant Naspers demonstrated its agility by heightening Media24’s focus on digital delivery, although it had to close several print titles in the face of a dramatic decline in advertising revenue. With the surge in demand for educational content, Naspers’s various educational platforms attracted a greater number of users.

This shift was also evident in the South African market’s shift towards ecommerce, which is expected to continue growing.

Naspers also demonstrated the power of collaboration. To take advantage of the change in buying patterns, SMMEs used the platform offered by Naspers subsidiary Takealot. Today, about half of the products sold on Takealot are sourced from SMMEs, creating a platform for these businesses to reach a growing customer base.

SA business growth – accelerating SMME expansion

Of course, SMMEs were much harder hit by the pandemic than larger businesses and funding is always needed. However, what is holding back SMMEs is not lack of money or skills, since big business is prepared to extend funding assistance and training, but regulation.

Government regulation, particularly for the digital sector, should be designed to create more businesses, not to ensure SA’s regulatory framework is the same as that of more advanced economies. The greater the regulatory burden on businesses, both large and small, the less likely they are to invest.

If businesses invest in raising SA’s manufacturing capacity, as Aspen has done, the environment improves for all businesses. Clearly, businesses are hesitant for some valid reasons, but they need to make a judgement call and take risks in order to source the available opportunities.

Aspen has invested heavily in manufacturing facilities over the past 4-5 years, and it is paying off. In the pharmaceutical sector, such investment could create an inflexion point for technology transfer. There is an excellent opportunity at this time for a manufacturer of the active ingredients needed for vaccines to make an investment in a facility in SA, which would entail a substantial amount of money.

Working together

Ultimately, to achieve the growth SA needs, businesses have to focus on what they can do to create a better future. Government has finally managed to source Covid-19 vaccines and is making some progress in deregulating the digital sector, for example focusing on the granting of licences for high-demand spectrum, and bringing down the price of data.

However, government needs to collaborate more with the private sector to make data more accessible, and on areas such as R&D and skills development. Making progress in these areas would help to support SMMEs, who need the internet as a runway to develop their businesses. Developing opportunities for SMMEs would contribute towards making SA a more equal and inclusive economy.