Vested interests have created a conflict of interest for Government
Narrowly averting a recession with marginal expansion in the second quarter does not belie the fact that South Africa's growth remains both exclusive and woefully inadequate. The national economy has been buffeted by adverse winds in the form of ratings agency downgrades, currency depreciation, violent and prolonged industrial action and more. Many and various commentators have opined about the need to create an environment conducive to attracting and retaining foreign direct investment (FDI), with yet others - typically those in Government - berating local business for its reticence to invest despite 'significant' cash on its collective balance sheet.
While the country continues to attract FDI, there seems little doubt that we could do far better. Recognised globally as having a robust legal and judicial environment, relatively sound infrastructure (although it can certainly improve, particularly with respect to energy security, rail transport, health and education, amongst others) and significant natural resources, South Africa continues to under-perform relative to these endowments and to our less well-endowed competitors. It seems the investment appeal may not yet be lost, but certainly it has lost some of its lustre.
Environments conducive to investment globally have several factors in common, namely "stable and solid public finances; low, simple and competitive taxation; simple and transparent business regulation; strong and impartial rule of law; openness to international trade and foreign investment; a welcoming environment for foreign talent; good connectivity in the form of road infrastructure, transit systems, ports, airports, education, skills and technology diffusion and limited - but effective - government."[i] South Africa's regional competitors appear to be making rapid progress on these criteria, while we appear to be regressing. Deep introspection - and decisive action(!) - is required.
A pressing need exists to honestly ask, and answer, whether our government is fulfilling its mandate to meaningfully enhance growth and development for all its citizens, and to create the policy environment needed for a high-growth, inclusive economy. In a country which has around 8,500,000 unemployed people - fully 35% of our workforce - one needs to consider the following: Cosatu, one arm of the Tripartite Alliance governing the country, has as its raison d'être the protection of (employed) workers who pay membership fees. For its sustainability, it cannot afford to lose members or to have breakaway unions splintering its power base.
At the same time, the ANC relies on Cosatu for votes during elections. The former needs the latter to maintain its power. The result is that Cosatu supports conditions favourable to employed workers, biasing itself against - in deed if not in word - the 35% of adult South Africans currently unemployed.
This conflict of interest is undermining our growth and sending a clear message that vested political interests (far) outweigh the national interest. In doing so, it is jeopardising employed workers' future opportunities because the strategy, as it currently stands, massively undermines business growth.
When politics encroaches on the economy in such a way that it stifles business' ability to invest, grow and enhance global competitiveness, one needs to be candid. In the reality sketched above, can Government be relied upon to address, effectively, one of the key conditions for creating a favourable climate to attract FDI, namely a flexible, well-functioning labour market?
When unionised workers prevent other workers from getting to work, when factories are forced to close despite wanting to produce, and when the relationship between business and organised labour is so damaged, the message to the global investor community is that SA is not 'open for business' and that a key risk - violent labour unrest - is not being effectively managed.
It is the role of business and Government to both address the issues and solve the challenges, and also to speak with one voice as SA Inc. We need to tell the world that we are, indeed, open to investment, that we will protect it and enable suitable returns. To do that, role clarity cannot be compromised. When one of the players in the game is batting for both sides, there is no level playing field. In that scenario, Government needs to be called to account.
If South Africa is to realise its 2030 vision, myopic politicking must be overcome in favour of a growth approach. As the economy contracts, contestation over what is left will simply grow. Sacrificing turf battles now for the sake of long-term inclusive growth will benefit all parties in the long run. We have the vision. What we need now is the political will to act on it, decisively and relentlessly.
Footnote:
[i] Razeen Sally, Visiting Associate Professor at the Lee Kuan Yew School of Public Policy, National University of Singapore, and Chair of the Global Agenda Council on Competitiveness of the World Economic Forum.
Chris Whelan is CEO Accelerate Cape Town. Accelerate Cape Town is a business think tank aimed at voicing the views of corporate business in the Cape Town city region in order to advance and implement sustainable, inclusive economic growth. For more information about Accelerate Cape Town, please visit www.acceleratecapetown.co.za.
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