THE URGENT NEED FOR SOCIAL AND CAPITAL PARTNERSHIP
There is an ever-increasing amount of frustration as we grope around in the dark following another bout of stage 6 loadshedding. The frustration is not necessarily due to knocking a shin once again, but more because the problems of Eskom have been documented for a long, long time and no progress and no solution ever seems to occur. This unfortunately is a sad state of affairs across many aspects of public sector delivery and in this month’s Financial View we explain why it is our opinion that something has to change, we need growth, jobs and increased tax collection. This can only be achieved if the public and private sectors join hands and work together.
It is fair to say that our government view the private sector with a level of mistrust. There has often been talk about partnerships between the public and private sectors to resolve various issues, but one just has to look at the delays that occurred with the government signing agreements with the independent power producers. A recent article in the Daily Maverick highlighted how agreements have just been signed for three projects which will deliver 420mW of wind power, this however out of more than twenty-five projects that were already meant to be on the grid. There is a great willingness from entrepreneurs to get involved and build the infrastructure to generate and distribute power. So why the great reluctance from the government??
South Africa is a nation full of complexities. Our history unfortunately has created a nation of stark contrasts as we entered our new democracy. The previous regime had left a land where most of the population had no access to basic services and there was an urgent need for rebalancing. Schools had to be built, electricity and water needed to be provided. Ultimately, it was hoped that the gap between the rich and the poor would be narrowed. With good intention we saw the creation of economic policies such as Black Economic Empowerment (”BEE”) became a key term in the workplace as South Africa set about elevating a greater percentage of the population into the middle class. Close to 30 years later we have broken municipalities, record unemployment and citizens are on average all poorer when measured by GDP per capita. In the last Quarterly Employment Statistics released by Stats SA they estimated that total employment is currently sitting at 9 948 000. The population of South Africa is in the region of 60million people which means one in every six is currently working. Or a more sobering thought is to think that five out of every six aren’t working. That is a huge number of mouths to feed per pay cheque.
So how did it all go wrong?
We can blame cadre deployment; we can blame corruption and we can blame the lack of accountability across public servants and BEE. In addition, poor policing, poor security (the army), poor traffic control has resulted in a general lack of respect for the law.
As a result, nobody seems to care. Taxes that are collected are not looked after so corporates do not trust the government and are reluctant to invest. Individuals also don’t trust the government and would rather invest offshore. As we said addressing the issue of imbalance was needed but there have unfortunately been unintended consequences.
New policies that were designed to correct previous imbalances have been used to benefit the few and have not been broad based. Throw corruption into the mix and the average citizen is paying more taxes and receiving less in return. The uncertainty over the direction of our economy and of our power supply has scared away foreign investment. South Africa has lots of things going for it being well located for trade into Africa and with harbours giving us access to the world. We have a large percentage of semi-skilled labour that should allow us to position ourselves as one of the world’s “factories” and we have a weak currency that means costs would be low for manufacturing (just think of how many tourists always mention how cheap South Africa is). Yet foreigners don’t understand the concept of having to give away a portion of your company for nothing in return and perhaps they don’t want external partners. Uncertainty leads to avoidance, and we have not seen any major foreign investment in our manufacturing sector at all.
The Solution?
We think there is one solution to address the imbalance – jobs! If the South African unemployment rate came down there would be more money for everyone, less dependents on each pay cheque and there would be broad based upliftment of a great percentage of the population.
We need to encourage foreign capital to enter the country, feel safe and welcome. The government must do their part, to make the country attractive, to keep the country clean, to enforce the rule of law, the rules of the road. It’s basic common sense, treat all people the same way, cut the grass, be polite and get the basics right. Create tax incentives for investment, encourage mining companies to open new mines encourage skilled people and professionals to obtain work. Create tax incentives and benefits for companies that meet empowerment credentials. In the last World Bank rating of the ease of doing business per country South Africa received a score of 84 (where 1 is the best rating). This puts on par with the likes of Mongolia, Panama and Kuwait – surely, we could be so much better…
The government has often taken the stance that the private sector would place jobs at jeopardy, but nothing could be further from the truth. Extensive investment into infrastructure, into mining, into manufacturing, into logistics and into services sectors will all require a great number of skills and a great workforce. Foreigners have the capital; we have the hands. Let’s make it work by doing our outmost to attract investors and partners. Provide some stability in the power supply; do away with the economic policies that are restrictive and open South Africa as a place to do business! This will result in more jobs, more taxpayers, new business and more tax paid by these businesses, more profits and job opportunities will flow through to the retailers and the whole country and every person living here will benefit.
South Africans were viewed as people who had a can-do attitude and were not afraid of hard work. We are now viewed as dependant and people with their hand out waiting for somebody to do it for us.
We don’t have time to waste, Mr President let’s make South Africa great again, join hands with business, work together to achieve our goals. Employ the right people and make sure the members of your team are the best for each position and let’s get back to work.
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