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Business Leadership SA CEO Busi Mavuso says nothing of domestic investment and the dismal rate of investment in the national economy (“Fix SA or face Arab Spring-like revolt, head of BLSA warns”, February 17). Yet this has everything to do with the  inhumane, globally unprecedented levels of poverty, inequality, unemployment and hunger in SA.

There is a great deal of research to support the assertions below, but here it is truncated: According to John Cairns, global markets strategist at Rand Merchant Bank: “A lot of financial investment capital is leaving SA. So foreign investors that have been holding local assets continue to sell moderate amounts, and then a lot of locals (are) taking cash offshore through legal means. While the local issues should not be overplayed, in general there is a clear shift of foreigners and locals taking money out of the country.” (November 2021).

Cairns said further: “It is not well acknowledged, but we are seeing huge capital flight from SA, which has been disguised by this record run in the commodity market.” The perception and cold reality of SA capital being on strike cannot be dismissed.

But perhaps more problematic with Mavuso’s narrative that “the country needs ‘serious’ levels of foreign-direct investment to bolster economic growth and provide employment opportunities” is that it swims against historical record, namely that “inflows of private foreign capital are a consequence of successful development — predominantly determined and conditioned by domestic factors — not a cause of it” (according to Dani Rodrik of Harvard). Or as SA Chamber of Business CEO Kevin Wakeford said in 2001, foreign capital chases growth.

As relates to the “Arab Spring-like protests” in SA in July 2021, the warning that this will be repeated “unless [government] fixes broken infrastructure, curbs lawlessness and fosters an environment for investment and job creation” refers. It bears recalling that 10-million people did not receive their social relief of distress grants in April and May 2021. Government reinstated the grant after the July 2021 protests.

One of the major triggers of the Arab Spring in Egypt was the Sisi government’s withdrawal of the bread subsidy. In Tunisia it was the self-immolation of an informal trader that triggered the revolt — in an environment where corruption within the police and among government officers was rife.

All of these protests have perhaps one thing in common. When people are starving they march on their stomachs — law and order be damned. A basic income grant is incorrectly criticised as a “handout” when it is in fact a “hand-up” and may well be SA’s only option to avert the impending revolt of the poor.

Without overplaying local issues — especially because government has bent over backwards to please foreign investors, ratings agencies and international financial institutions (and the research on this is voluminous) - organised business and its leaders would do well to focus on why capital flight, disinvestment, offshore listings spark and fuel rebellion and revolt of the poor.

Without doubt the dysfunctional government-run network industries — energy, transport and water — crime, corruption,  Eskom and broken infrastructure are huge deterrents to investment and need fixing. This is not contested by anyone. But there is also research showing a positive association between business risk and rate of return.

In other words, the greater the risk the higher the average rate of return. Disinvestment, capital flight and offshore listing — in a business-friendly environment — drives and powers joblessness, hunger, poverty and inequality in SA.

Firoz Khan
School of Public Leadership, University of Stellenbosch

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