Business never sure whether ANC is friend or foe

DESTRUCTION IN THEIR WAKE: Delegates attend the OR Tambo centenary celebrations in Cape Town. The writer says the current crop of ANC leadership wiped their feet on his iconic heritage. Picture: Ian Landsberg

On Wednesday 25 October, the Minister of Finance, Malusi Gigaba delivered his maiden Medium-Term Budget Policy Statement (MTBPS) at the National Assembly which was widely seen as honest and well-articulated, despite lacking specific actions on what the Minister will take to get us on sustainable growth trajectory.

Once again however the statement revealed the numbing gap between ANC rhetoric on economic policy and what we actually say in government. These are self-inflicted gaps which move from populist narratives as we criss-cross the country campaigning and the reality and seriousness of governing a modern economy.

The contradictions were soon clear on the question of Mining Charter and Nuclear Deal post-statement. Malusi was clear that business and government need to engage on the Mining charter until middle ground is found. Mosebenzi Zwane, the Minister of Minerals feels that he has exhausted this path and business only seek their way or no way and government, in the end, must govern. Malusi also made it clear that at this stage of the economy, we do not have enough economic activity to require Nuclear Energy. We actually have huge energy excess. The Nuclear option is therefore counter-intuitive at this stage. It was only the following day that the New Minister of Energy, David Mahlobo told the country that the Nuclear option is going ahead.

The reality of all countries today is that they are all competing to be the biggest recipients of foreign direct investment. For South Africa, that FDI needs to help us move away from over-reliance on natural resources for exports and avoid a complete shift towards the elitist financial sector. We need the middle ground, a thriving manufacturing economy that can pull our people out of unemployment and poverty, particularly for our young people.

The priority of the ANC government today is restoring a strong economy and delivering the much needed jobs above all else. Economic growth is critical for any country because it increases public finances and reduces unemployment among other things. A reduction in government debt as the economy grows helps us improve our GDP/Debt ratio, and help us improve investor confidence. As long as our SOE’s are bleeding the state instead of anchoring the economy and as long as irregular expenditure continues to be a yearly drain in our fiscus, we are not going to succeed in improving our public finances and show investors we are a country that lives within its means. 

South Africa is currently suffering from historic low levels of investor confidence. We have very low levels of consumer confidence. The result is very low levels of economic activity as business and consumers pull back from the market.

The lack of business investment, as many have told us, is not because of low levels of liquidity but because business are not convinced of returns if they expand and build more businesses. Consumers are also taking less debt and buying less because of anxiety about their own futures and that of the country. 
The question then that Malusi had to answer was what measures government could take in order to get back investors and consumers into the market place. Government has a few tools at its disposal in order to reboot the economy and ignite both business and consumer confidence.

There are specific things we can do to reboot investor confidence in our economy and Malusi touched on all the right buttons. The first step in getting the needed investor confidence is to make the right investments that will ensure a much more predictable future with a positive outlook. It goes without say that everyone would like to get a sense that our government prioritizes education and research, both in investment, in demanding better returns from those investments and redesigning certain aspects of our education programmes in order to build a pool of future business leaders.

An investment in education must be accompanied by a plan of scaling down our SASSA programme so that as part of the fruits of education, we can show that many people are moving out of SASSA programmes into self-reliance and financial independence.  A country with a future educated populace and less government support programmes is a country worth investing in.

The second thing our government needs to look at is our regulatory framework. A regulatory framework that is cumbersome, tedious and unfriendly pushes investors back. A regulatory framework must come with certain guarantees, consistency and clarity so that businesses can focus on the business activities, on outwitting their competitors and on finding gaps of expanding their reach and not on beating the regulatory maize.

Part of the clear regulatory framework is the protection of workers who form the consumer base of the country. It is ridiculous that there must be no fair wage mark in the market as a condition for more employment. That has never been proven anywhere in the world. What ends up happening is an exploitation of workers, slowing down of productivity, strikes and violence caused by worker dissatisfaction.  It also breeds the monster of extreme inequality, which later causes resentment and more chaos.

Wits University released a report a year ago which rightfully suggested that a national minimum wage beginning at between R3,500 and R4,600 a month, and the increased buying power it would create, would stimulate the economy. This has rightfully been adopted at Nedlac. This means no employer is allowed to pay a worker less than this minimum amount.

This is easy to appreciate. If you gave R10 million to one man, he might spend 2 or three million of it. But when you give R10 000 to a 1000 people, all of them will spend their ten thousand rand and the economy will get the whole 10 million that would have been missed by the economy were it given to one man. These heavily skewed pay gaps between executives and employees is therefore detrimental to the economy.

In times of economic downturn, it is also wise for government to consider easing its tax burden on business as an incentive for business growth. Most importantly however is a targeted government expenditure, particularly a heavy infrastructure spend that will serve to stimulate the economy whilst making critical investments into the future. In essence, government has to fill the void left by business in order to keep the economic activity up to a point where business comes out to the market. Infrastructure increases productivity by enabling businesses to operate as efficiently as possible. As it would naturally follow, infrastructure spending creates jobs as workers must be hired to complete infrastructure projects that are green lighted.

Our roads need great overhauls everywhere you go, compromising the efficiency of commerce. There remain communities and towns without reliable electricity supply and one can imagine business losses that are caused by such regular outages. The most important investment though in South Africa is a need to do a complete overhaul of our railway infrastructure. We have discussed before that if we can have a world class, reliable railway transport across the country, we can move much of the goods transported by big trucks on our roads into rail, thereby unburdening our roads of the heavy vehicles, saving us money on road maintenance, and more importantly, reducing accidents on our roads which are also a big drain on our fiscus.

What the ANC needs to finally come to terms with is the reality that we continue to be a contradictory organization both in policy and rhetoric. On one hand we acknowledge the role of business in creating jobs and reducing poverty, on the other hand our socialist posture and our revolutionary ethos, suggest an attitude that sees business as an enemy of the people, exploiters, abusers of labor, selfish profit driven crusaders who must be stopped through regulation and threats.

Business is never sure what the ANC is really up to and weather ANC sees business as friend or foe. It’s time for us to send a clear message to business.
It is time to close the gap between our political and government rhetoric.

Yonela Diko is a Media & Communications Specialist.