Tuesday, October 29, 2013

Worry that SA is not a republic fit for bananas

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29 Oct 2013 | Tony Leon | Original Publication:  BDlive

Pundits putting percentages on the risk of South Africa’s descent into the league of 'failed states' makes for good headlines but it is probably not time to head for the hills, writes Tony Leon

NEVER make predictions," US movie tycoon Samuel Goldwyn cautioned, "least of all about the future". I recently read a piece on the perils, or otherwise, of population growth by US journalist Elizabeth Kolbert. She recalled that, in 1978, Paul Ehrlich published a bestselling work, The Population Bomb, which predicted an imminent apocalypse. According to this Stanford University biology professor, nothing could be done to avert losing the final battle to feed humanity. He predicted the 1970s would see the world "undergoing famines — hundreds of millions of people are going to starve to death".

Back then, the population of the world was 3-billion, and today it has more than doubled to 7.2-billion.

I recall Steve Mulholland once saying something similar along these lines: "Ever since I was five years old, I was always told that SA had five years to go; well, I am now 75 and we are both still here."

So when pundits put percentages on the risk of South Africa’s descent into the league of "failed states", it makes for good headlines but it is probably not time to head to the hills. This is not because of the likelihood or otherwise of the prophecy being realised but for a far more prosaic reason: as the investment industry always footnotes its rosy scenarios of how your retirement nest egg will wondrously multiply, "future performance cannot be determined from past results". Indeed.

Last week, I was involved in a conference on the much contested and seldom read National Development Plan (NDP).

One reassuring fact presented to the audience by a senior officer of AgriSA was the news that, officially, South Africa is not a banana republic and nor is it likely ever to become one.

He did not quite put it in those terms. Rather, he noted that due to the facts that fuel, electricity and labour prices are about 50% cheaper in Mozambique than here, most South African banana growers had relocated across the border.

Finance Minister Pravin Gordhan delivered a masterful medium-term budget policy statement last week. By highlighting the pushback against government bling and excess after more than a dozen years of frenzied feedings at the taxpayer-funded trough, he switched off some of the supply: small measures, a big signal and excellent headlines. But in the small print were indications of the very tight fiscal spot in which Gordhan and South Africa find themselves.

One of these macrotrends is also central to the NDP. Capital investment spending in the 1980s was about 30% of gross domestic product and today has fallen to about half that figure. As the NDP notes, the country has "missed" a generation of spending on "road, rail, port, electricity and sanitation", etc.

There is, it notes, no prospect of growing the economy in an inclusive fashion until we, economically at least, go back to the 1985 benchmark, presumably before the Rubicon speech. Quite how this will be done with consumption spending on 16-million monthly cash grants and salaries for 1.25-million public servants is not addressed, except for saying we must make some "tough choices".

But, as a business leader told our NDP conference: "We need to become again a savings-based investment economy and no investment can be funded without savings."

This mantra might be so obvious as to be banal. But there is no sign of the fact that our only historic source for extra long-term investment, foreign direct investment (FDI), gets anything but proverbial lip service from our economic overlords.

Growth and investment seem to be "nice to haves" and "optional extras" in the priority stakes, way behind the queue of black economic empowerment and tighter state control, as though the prioritisation of these policies has no, or at best a neutral, effect on the quest for growth and savings. The reversal of FDI flows tells its own story. So does the exit of our banana growers.

On the subject of predictions, last week Politcsweb decided to republish a speech I made in Parliament in August 1998, opposing the Employment Equity Bill, due to its race-based provisions and coercive codes.

Both the debate and the party concerned have since moved on.

I did think back then that the prescriptiveness of the legislation would deter FDI and prove to be a job-crusher, except for the middle and upper classes. In the debate, I used a quote from then finance minister Trevor Manuel as a warning. It seems even more relevant 15 years on: "We have to attract foreign savings … the benchmarks used to assess SA as an investment centre are the same across all countries."

What has also changed since then is Manuel’s position at the Cabinet table. Now he is in charge of the NDP. Perhaps while he remains in the government, he can remind his colleagues of his now old, but still relevant, warning. And maybe others, in the business-class cabin where all must now fly, can join up the dots.
Leon is the author of The Accidental Ambassador (Pan Macmillan). Follow him on Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA
 

1 comment:

Trudi Schwartz said...

I would love to hear an updated commentary on Marius Fransman in view of the march and mayhem in Cape Town on Wednesday? Your blogs are the highlights of my life.