LETTER: The next 18 months are critical for SA
The ANC conference in December may result in a rebuilding of the ANC leadership; let’s hope it’s a better one than we have now
The next 18 months are going to be critical for this country. The ANC conference in December may result in a rebuilding of the ANC leadership, to take us forward in a positive direction. If it does not do so, the prospect for positive change will have to await the 2019 elections.
What has happened over the last decade has been tragic for SA. Prior to 1994, SA was blighted by apartheid. Having shed that burden and having enjoyed a positive period of new democracy and the building of a "Rainbow Nation", a model to the world, we are now viewed internationally as a corrupt state, unfit for investment.
There are probably about a couple of thousand people who have benefited from the looting of state resources, with billions of rand being cached overseas. They have destroyed the image of the country and weakened the currency, resulting in higher interest rates and a depressed economy. Unemployment and poverty have worsened because of their selfish greed.
The ANC leadership as currently constituted has no answer to all of this. They are too pre-occupied by their own survival to care for the well-being of the nation as a whole. They don’t mind if sacking the finance minister and his deputy results in a crisis for the rand and the risk of a re-rating to junk status, with all of its adverse effects on the economy, as long as it makes their lives a bit easier and their prospects for ongoing power better.
The judicial commission of enquiry into state capture was called for a year ago. A pretext to delay it was the argument that only the president can appoint the judge. The fact that he is implicated and should therefore recuse himself is so blatantly obvious as to be almost absurd. As it is, this point is still undecided and we may still face the prospect of a "whitewash" commission.
It is to be hoped that a positive outcome will emerge from the December ANC conference. Failing that, the ongoing seepage of support for the ANC may result in a coalition government of the current opposition parties in 2019.
We have settled into accepting no growth, massive unemployment and pervasive pessimism. The government has no answers to deal with this except more of the same policies, which have clearly failed
Years ago, an investment professional in the UK commented to me that the South African economy is always either "boom or bust", from a sentiment point of view. Nothing has changed, except that there are no longer any booms. We have settled into accepting no growth, massive unemployment and pervasive pessimism. The government has no answers to deal with this except more of the same policies, which have clearly failed.
What should a new leadership do to transform the situation? First, it should immediately set about rebuilding the state institutions, which are supposedly responsible for law enforcement, but which have done nothing to combat the current scourge of corruption. Secondly, they have to get a grip on the state-owned enterprises, which have been the source of much of the plundering of state resources.
Eskom, for example was until relatively recently a prime engine for growth in SA. It produced the cheapest electricity in the world, which encouraged investment in industries and mines in SA. It has now become a major inhibitor of growth, through huge inefficiencies, project cost over-runs and ever-escalating electricity prices making SA uncompetitive for new industrial investment projects. It has stoked inflationary expectations, resulting in higher interest rates.
Next, they should understand that the sole significant sources of new employment in SA are investment here by overseas companies and the strong development of the local small-business sector. The "Celtic Revolution" in Ireland’s economic growth was ignited by the huge efforts of the Irish Development Agency, in attracting investment by overseas companies. We need a significant, well-funded, equivalent body, to promote inward investment.
We should also understand that the black economic empowerment (BEE) ownership and other transformation requirements are immensely complicated, confusing and off-putting for overseas companies potentially interested in investing here, compared with alternative destinations for their cash. They should be given a period of (say) five years in which to meet these targets, so that they are not immediately deterred from investing.
The small-business sector needs two "shots in the arm", to transform. First, access to funding: anyone investing in a small business should obtain tax relief to the extent of that investment, on production of an auditor’s certificate, as in the case of the UK, for example. Our current Section 12J relief provisions are so complex that they cannot be used by any but the most sophisticated entrepreneurs. The increase in the tax base that would result (via VAT and PAYE) would more than make up for relief granted.
Second, the onerous employment laws and practice by the Commission for Conciliation, Mediation and Arbitration (CCMA) should be eased for small businesses, until they reach a certain size in terms of turnover. People starting small businesses should be able to reduce staff if things do not go according to expectations. The South African Revenue Service (SARS) should be trained to assist small businesses in their early stages, with the complexities of VAT, etc.
They should also appreciate that exchange control regulations, by their very existence, condemn a country to second-rate status. It is impossible to be regarded as a modern, economically progressive state, while retaining exchange controls. Ironically, even in the current state of the economy, the complete and final abolition of exchange control here would be regarded as a positive move.
Finally, they need to treasure the relatively small tax base of individuals who are largely funding the social grant system here. By constantly subjecting them to higher effective tax costs, they are encouraging emigration to countries that welcome them with lower taxes and better public services.
• Curle is an Oxford-educated former merchant banker, who has served on the boards of several JSE-listed companies