It’s the Economy, Stupid: How to unlock avenues for investments
- Oscar van Heerden
- 31 Jan 2018 (South Africa)
Let me be the first to say a clean-up campaign is long overdue. Taking these State Capture fools to task is most necessary and bringing most of them to book cannot be challenged by any of us. However, the ordinary voter out there is still waiting to see what real change will be brought about for him/her as we edge ever closer to the 2019 general elections. Everyone agrees there is only so much that can be done in the next 12 months and that more time would be required to undo, on the one hand, the wrongs of the Zuma administration, but also on the other hand the matter of fixing the economy.
The economy needs fixing for obvious reasons such as job creation, growth, lowering the debt levels and attracting much needed investments.
And just to put matters into perspective for those who advocate immediate and unrealistic change, these are some of the very complex matters that would have to be addressed by the Cyril administration if we are to begin to fix the South African economy.
We are in a policy cul-de-sac and have been for the last 10 years. In many ways we have been rudderless, according to some economic analysts. How do you unlock avenues for investment in such a climate?
Well, for starters, with the current wage agreement under negotiation, we can potentially be thrown into yet another #FeesMustFall type debacle. What I mean is that the Zuma cronies are not idly sitting by and waiting for their day in court; oh no, they are actively working to undermine the incumbent. So we can safely assume that if Cyril does not have his finger on the pulse with regards to this round of public service wage bill negotiations, we could see his administration again having to come up with billions, such as the case with higher education. The current three-year agreement comes to an end on 31 March.
When looking at the economy, I am loath to say that the biggest fiscal risk is our very own state-owned enterprises. Yes, Eskom, SAA, Transnet, Post Office SA, SITA, to mention but a few. I dare say that what’s needed is a pragmatic approach to these challenges and not an ideological one.
Investors and the public are tired of talk and policy deliberations, they want to see real action to demonstrate fundamental change and bring investor confidence back into the economy. So, let’s be clear what such pragmatic real action should potentially look like.
Sell SAA now or come with a plan to radically transform the bankrupt entity. A few years ago, as I attended one of the budget breakfast functions with the then Minister of Finance, Trevor Manuel, I remember there had been a massive bailout amount made available to SAA just weeks prior and so when one of the audience members asked whether it was time we sold SAA, the minister’s response was, “I would love to sell, any takers?” At which point everyone in the room was rather quiet.
The point he was making in a rather facetious manner was that no one wants to buy an airline in this day and age and that there were no takers, but I say the public are the main taker, minister, and we cannot sit by and continuously see our tax money being used to bail out a bankrupt entity.
I say cut international flights and allow SAA to become a regional airline, in other words, flights only on the continent. And yes, the flag won’t fly to Beijing and London any longer but we would have a profitable entity and after two years government can invite interested private equity partners and maybe slowly work our way back to being a credible international carrier.
Another area that requires intervention urgently would be the broadband sector, and here is something the current ANC president knows much about through his own private business venture. Perhaps auctioning broadband is not a bad idea in order to stimulate competition in the market. The fact that government has been obsessed with the ownership patterns in the sector and with finding a black-owned stakeholder remains commendable but not at the expense of transforming the entire broadband market; after all, the advancement of the country is more important than just developing a small black elite class in the sector.
We have to take serious suggestions of possibly breaking up the Eskom- energy sector. Either you get the tariff to sustain the current model (which will make electricity completely unaffordable) or a serious plan is needed to restructure the entity. Not a complete neoliberal agenda of privatisation but making a clear distinction between the three components of Eskom which is the generation, transmission and distribution components.
It is time, in my humble opinion, that we separate these three components into the hands of smaller private companies; some can be in the generation game of which Eskom will and can remain the biggest player, some companies will be in the transmission game and others will be in the distribution game. This way you create more jobs and work opportunities for people and you narrow the risk portfolio of Eskom which in turn will have a positive effect on the balance sheet and debt levels of the entity.
A few years ago the government tabled the Independent System and Market Operator (ISMO) Bill in Parliament. Perhaps it is time that the dust be blown off this Bill and we begin to implement it in earnest. The ISMO was proposing an independent regulatory body much like ICASA and Nersa which will then manage the three components mentioned above as well as the tariff structure thereof.
As for the troubled Transnet, it too needs restructuring in order to finally get a handle on our transport and logistics needs and how to make them self-sustainable. Our roads are taking a beating from trucks, and investment into rail infrastructure is dearly needed. Public transport between cities is the next big challenge; mobility requires fast, efficient and safe transportation modes, such as fast/bullet trains. Why we have not heard of such plans from Polokwane to Joburg or Joburg to Durban and of course Joburg to Cape Town is beyond me. It’s time the private sector come to the party in this regard.
It doesn’t matter whether the cat is white or black, you want to catch the mouse and the mouse in this case is economic growth. Let’s not quibble over how but let’s implement the National Development Plan with some extra characteristics as proposed.
As for the Artificial Intelligence (AI) race and the Fourth Industrial Revolution, we’re still asking, where are the starting blocks? The Far East and the Western hemisphere are not waiting on us in this regard, oh no, they are moving at the speed of light. Not only are they continuously researching robotics that can think and make complex decisions; I have a friend who is employed by Google, simply looking at developing what is commonly referred to as a “kill switch” for such robotics, in other words, while one group researches and develops robots that can do very complex things – fly a drone, drive a car and so much more – another group in the same building is researching and developing ways of how to switch off such robots should they go rogue or ballistic. Where are we? Is our Council for Scientific and Industrial Research on top of this game? I wonder, and I hope we are not completely left behind on this most crucial scientific path.
Last, I want to talk about our private sector and the fact that they have been using the excuse of policy uncertainty for years now, in order not to invest in the local economy. The time has come for you too to step up and work hand in hand with the Cyril Ramaphosa administration to see this pragmatic approach through. If you don’t come to some agreement and unlock the billions you’ve been sitting on over the years and not been investing in the South African economy, this approach is doomed from the start and you would have to own your fair share of the failure of the South African project. It cannot be government on its own to right the wrongs of centuries of disenfranchisement. Poverty is not and never will be only a government problem and the sooner you realise that, the better for all of us citizens.
Investment is about confidence in the future; you have to create forward movement otherwise we will be dead in the water and any hopes that the electorate will be voting for you, Cyril, will remain a pipe dream.
So, Mr (ANC) President, with all these challenges ahead, I hear you about a dignified exit for Zuma and a managed transition process, but I’m afraid we don’t have the time nor the luxury, for time is against us.
It’s the economy, stupid, that will make the difference come 2019. Our people are fresh out of hope and they want to see real, concrete action that will change their lives or at least see the necessary changes that will give them all the confidence that change is well on its way.
History will judge us all for our inaction. DM
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