Rebuilding SA by rebuilding its confidence
SA has challenging political, economic and social issues, but the economy must be transformed without self-enhancing agendas for a political elite
The SA economy, like many emerging and developing economies, has high levels of poverty. As with many such countries, there are three primary objectives to reducing poverty, unemployment and inequity. These three objectives take precedence over almost all other goals.
The only long-term means of achieving these objectives is to increase the country’s economic growth rate. SA is in a unique position to achieve these objectives as it has an abundance of natural and human resources with a robust infrastructure to build on. The natural resources, in terms of commodities, are some of the richest in the world, while the country has available a skilled workforce and an abundant unskilled workforce.
The country also has a robust, but rapidly weakening infrastructure, to build on to support economic growth.
The country is short of capital to finance development. The state requires long-term finance, not fast returns and changeable financial and monetary flows. Investors need to have confidence about the long-term economic, political and social policies, and to have faith that the current and future governments will continue to support business investment, both foreign and domestic.
It is not the government’s function to do everything for its people, but it is its duty to create conditions that will encourage enterprise ... that results in equitable distribution of all the benefitsHendrik van der Bijl. SA industrialist
The immediate and most urgent need is for the economy to recover from the lockdown implemented due to the coronavirus pandemic. There is every indication that the lockdown has caused, and is continuing to cause, widespread economic and social damage.
Extreme poverty and starvation have increased at exponential rates, which could cause social unrest and violence, even a revolution. The basic fact is that the lockdown is slowing down of the spread of the disease, but it is not preventing it.
It is not just a question of returning to business as usual. Economic growth must be capable of achieving the GDP growth recommended in the National Development Plan of more than 5% per annum. Only by doing this can the primary objectives of reducing, poverty, unemployment and inequality be achieved.
It is a question of rebuilding confidence. Many of the steps required are challenging political, economic and social issues. Nobody disputes that the economy must be transformed. Unfortunately, while many of the policies are well-meaning, they are being used to further corruption and self-enhancing agendas for favoured individuals and a political elite.
These need to be addressed as they are hindering business confidence and investment:
- Reducing corruption and state capture while restructuring and improving the competence and financing of state-owned entities (SOEs). This may require that they be privatised, or at least made into public-private partnerships.
- Embarking on a programme to re-industrialise the nation and ensure the country has the infrastructure to grow. The programme requires increasing the ability of investors and businesses to do business, including reviewing well-meaning policies such as affirmative action and BEE. The economy needs to utilise the best trained and qualified people whatever race they may be.
- Improving education with the focus changing to work-related skills training and education. Not everyone is suited to academic university education.
- Industrial and business relations need to be improved. At present there are too many political groups with anti-business and racial attitudes. The relationship has deteriorated substantially because of hardening anti-white and anti-“white monopoly capital” attitudes.
- Giving business investment and individuals certainty regarding ownership and control of their assets. An ongoing problem remains the threat of expropriation of land without compensations. This uncertainty needs to be eliminated.
- Scrapping plans for National Health Insurance (NHI) and considering an alternative scheme. The project is unaffordable for a developing country such as SA and the process of trying to implement it will wreck the existing world-class, private healthcare system.
- Many laws and taxes must be eliminated as, in effect, they only raise the cost and increase the difficulty of doing business in SA. Examples are the carbon tax and sugar tax. Eliminating minimum wages, or at least ensuring that these levels are set at extremely low levels, is another example. While these policies are well-meaning, they only lead to increases in unemployment and inefficiencies.
- Finally, there have been many calls by experts for the promotion and development of small business and entrepreneurship. It must be recognised that real growth in an economy results from the growth and expansion of large and medium companies and the role they play in developing mega-projects. The risk of failure of small and entrepreneurial businesses are high, and costs are therefore high. Current attitudes towards large companies must change. SA has virtually destroyed its construction and mining industries. This process must be reversed.
The most effective way of creating growth opportunities and creating opportunities is to focus on developing SA’s vital infrastructure. This has been done before in the country’s history when SA was facing significant economic problems and hurdles. This included the major dam build programme, including Gariep, and the development of Richards Bay and Saldanha Bay harbours.
Historically, Hendrik Van der Bijl built and developed many of the erstwhile drivers of the SA economy, namely Eskom, Iscor and Vander Bijl Hydraulics and Engineering.
It should be noted that Van der Bijl did believe that the state provide the infrastructure for private business to thrive, or that it should nationalise privately owned business. He set out his philosophy in these words: “It is not the government’s function to do everything for its people, but it is its duty to create conditions that will encourage enterprise, not the type of enterprise that results in the unfair enrichment of some at the expense of others but enterprise that results in equitable distribution of all the benefits.”
The words of Winston Churchill should also be heeded: “If you destroy a free market you create an illegal market. If you make 10,000 regulations you destroy all respect for the law.”
• Jeffrey, a former MD of Econometrix and of Dorbyl Structural Engineering, and chair of Constructional Engineers Association, is an independent economic risk consultant.