BHEKI MFEKA: Foshan’s success shows why local government matters in the quest for investment
The city generated nearly two-thirds of the GDP of Guangdong province, a powerhouse of Chinese and world exports
With the second instalment of President Cyril Ramaphosa’s SA Investment Conference taking place this week, a proper view of who is an investor is necessary.
There is a notion that an investor is a visitor who is waiting out there to come to the country and will judge if he/she comes once certain things are in place. Perhaps that is true in the case of international portfolio investors who come and go at the whim of leadership decisions affecting the stock market; and for those foreign investors who have never done business in SA.
However, an investor who has set up a factory in Ladysmith KwaZulu-Natal is an SA citizen like you and me. She/he needs all the rights and privileges that accompany citizenship. It is also expected that the investor complies with the responsibilities of a citizen as an individual or a business. An investor who is a citizen is the most important as she/he contributes directly to the livelihood and vibrancy of a society.
Moreover, environmental, social, and governance (ESG) imperatives require that investors indeed become citizens by relating sustainably with the environment and people, as well as by putting in place proper governance systems for their businesses in compliance with the laws of the country.
SA has been hosting top global multinational companies and brands since time immemorial, more than any other country in Africa. It is important to maintain these citizens, as they comply as well. Of course, the quality of their citizenship before 1994 has been the subject of much controversy, often going against the aims and objectives of the liberation movement at the time. Most of them did not emigrate as democracy was setting in but were willing to adapt and contribute positively to the new political environment. Several new investor citizens from other countries have since joined us, including companies from Asia, Eastern Europe, and South America.
It is therefore not only in the announcement of big dollar/rand commitments that the value of the SA investment conference lies, but in the comfort of satisfaction that what would seem like small things for citizens and by citizens, if taken care of, could generate trillions of rand for SA.
I say so knowingly and aware of the perception that the private sector has been on an investment strike, allegedly clogging cash to the value of more than R700 bn. I would want to argue that investors as citizens, including workers’ pension funds and any citizen with savings, are not motivated to invest only based on what the president or politicians say, but by lived experience where they reside and do their business.
Yes, policies and regulations at a national level do get a lot of mileage and tend to get reaction in the national media, often in as far as they affect the bottom line. However, less is often said about the lived experience, especially at the municipality level where people interact daily. We all know that politically, the local government is perceived as a launch pad for a political career.
Developing countries that have experienced unprecedented growth over the past 20 years, such as China, however, show that local government leadership is the most important for any country to grow aggressively. The example of a city in the south of China called Foshan in Guangdong province, is the most immediate and has led scholars to term China’s growth phenomenon the Foshan model of growth. The leadership of the Foshan local municipality a little more than 20 years ago was very deliberate in creating a local environment conducive to all citizens being investors. Indigenous citizens are investors because they own land, as a point of departure even for the proletariat.
Other citizens who eventually got attracted to reside in Foshan were very happy to see clarity being provided by the local leadership on property rights, government commitment to building infrastructure, quality of services in local institutions such as the courts, municipal services, including quality of local and regional planning, and even restaurants.
Today, Foshan is the largest exporting city in China, enjoying location advantages, proximity to Hong Kong and the sea, and attracting top private exporting companies. Foshan contributed 62.5% to Guangdong’s economy. About four cities in China — Shanghai, Beijing, Shenzhen and Guangzhou — contributed a combined 10-trillion yuan (R21-trillion) to output in 2017, according to available data, indicating the significance of the local sphere of government.
So, it is cool to be a leader and politician in a local government. You must account and compete on how your government and citizens are faring in terms of service delivery, attraction of new investor citizens, infrastructure improvements, etc. By the way, how is your supply of water, potholes, queues in municipal offices, quality of service at the counter, peacefulness of protests, etc.?
Similarly, this can be asked of the responsibility of investors as citizens. How are you treating your workers, and are you contributing to worker education? How are you upskilling your workers for the future of work? Are you paying your taxes on time and adequately? By introducing this type of orientation and investor citizenship in our quest for increased investment, we should be able to see small things when being done correctly generating huge returns for SA.
• Dr Mfeka, a former economic adviser to the presidency, is economic adviser and strategist at SE Advisory.