Governance Watch

Unintended consequences – government warning system not working

Tourist queues drying up?
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On paper the South African government has a state-of-the-art regulatory and policy consequences alarm system, but in practice it is patently not working.

That is why an inter-ministerial committee on immigration under the chairmanship of Deputy President Cyril Ramaphosa was tasked last week to investigate the “unintended consequences” of the new visa regulations. They will be doing work that should have been done before the regulations were promulgated.

This is but one example that shows how government’s own instruments to avoid – or at least minimise – the risk of “unintended consequences” are either ignored or at best not followed diligently enough by members of cabinet and their departments.

Spotting unintended consequences

Since the late 1970s governments across the globe have been implementing Regulatory Impact Assessment (RIA) processes to help ensure good governance and minimise the risk of unintended consequences emanating from new legislation or regulations and/or policy directives.

The trend was started in 1978 by the Carter administration in the United States, during a time of runaway inflation. Then it was really “Inflation Impact Assessments”, as part of the process required during the formulation of policy and regulations.

It was later broadened by the Reagan administration to what was called “Benefit-Cost Analysis” (BCA).

Australia followed with its own RIA process in 1985 and by 2000, 20 of the member states of the Organisation for Economic Cooperation and Development (OECD) had implemented RIA requirements. It is now more or less standard procedure in most developed countries, the United Kingdom having joined the ‘RIA club’ in the mid-1990s.

The World Bank also embarked on a campaign to promote the adoption of RIAs by its client countries to help them deal with the complexities of the multi-faceted modern economy.

A report published by the bank’s Regulatory Policy and Management (RPM) Group in June this year, in reference to global trends, states: “The role and impact of regulation has drastically increased over recent decades. As policy-making through spending and taxation has become constrained, regulation is becoming governments’ preferred tool of choice.

“Efficient management of the regulatory state requires tools and mechanisms similar to those applied for other core tools of government. The institutional dimension and quality assurance mechanisms of regulation-making, review and delivery, however, is far less developed than in the fields of taxation and spending.

“Many countries experience a large implementation gap between regulation ‘on the books’ and the actual regulatory practice at the point of delivery.”

South African situation

In the early 2000s a strong lobby developed in the South African business community for the introduction of a RIA system.

In a 2003 report the South African Foundation wrote: “Regulation is a reality in the South African market. Regulation without the necessary checks and balances, however, can create as many problems as it provides solutions.

“In particular, it has been shown that small businesses often carry a disproportionate burden of regulatory costs.”

In December 2004 the South African Presidency and Treasury commissioned a consortium to provide it with “an analysis of what the country can learn from international experience with RIA and to consider the ways in which such a system might be best institutionalised in South Africa”.

In an interim report the consortium stated that “most government departments reported that they did not specifically assess the unintended consequences of proposed regulation …”

In 2012 the Presidency finally published guidelines for the implementation of the RIA process in the country.

At a workshop in April last year at the University of Pretoria on the “Challenges and Opportunities of Regulatory Impact Assessment in Developing Countries” it was concluded that although “the challenges facing RIA in these (developing) countries may not be substantially different from those facing developed countries, they are often of a different order of magnitude. 

“Furthermore their solutions need to be construed within the very different and diverse contexts of developing countries. It cannot be considered appropriate to simply transfer ‘best practice’ models rooted in different economic, social and political contexts of developed countries.

“The voyage is also likely to be a lengthy one: experience of RIA in OECD countries and demonstrated that RIA systems are dynamic and undergo many years, often decades, of revision and improvement.” 

Early this year the South African cabinet approved the replacement of the RIA with a Socio-Economic Impact Assessment System (SEIAS) for a broader assessment of policy initiatives. Four broad criteria were proposed for SEIAS implementation: social cohesion and security, economic inclusion, economic growth, and environmental sustainability.

The Department of Planning, Monitoring and Evaluation is to oversee its implementation and provide capacity support to policy makers and legislators in concluding assessments, something which requires wide consultation with stakeholders and liaison between government departments.

In its 2015 Economic Survey of South Africa the OECD warned that “a problem for securing a common approach to the analysis is that the current guidelines suggest that these elements of the analysis are expected to vary according to the cost of the policy or intervention in question. The implementation approach to SEIAS is one of mutual learning and experimentation.

“To avoid confusion (and unintended consequences) over the implementation of SEIAS, this approach requires clear and uniform criteria which inform the analysis and ensure that the methods of the analysis are comparable across proposals.”

What has happened with the implementation of the new visa regulations, despite high-profile warnings from private sector stakeholders, and the devastating effect it has had on the South African tourism industry, seems to suggest that that is exactly the trap South Africa fell into.

And, as we reported before, it not only led to uncertainty in the business community but also created the impression that the Zuma administration was at war with itself.

The OECD noted in their overview that South Africa has a good plan for economic development in place in the form of the National Development Plan (NDP), but as its first key recommendation for sustainable and inclusive growth, the OECD states that policy implementation should focus on the objectives of the NDP.

For that to happen, government should get its act around its own SEIAS together, get it properly institutionalised at all levels and formations of government and ensure disciplined adherence to its processes.

by Piet Coetzer

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