The great writer and philosopher Mark Twain suggested: “It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.” It’s advice rarely heeded by many in South Africa’s political leadership whose ignorance of running a complex modern economy are becoming increasingly obvious. These Know F-Alls with hides thicker than our endangered rhinos, specialise in knee-jerk and emotional responses on issues they so obviously don’t understand. This is something a capital hungry developing country can ill afford. Our CNBC Power Lunch interview with top economist Iraj Abedian highlights damage being done by clueless policy makers who bring new meaning to the Peter Principle. Probably the smartest man who lived, Albert Einstein, said you really don’t know something unless you’re able to explain it to your grandmother. And to build on Twain, if that’s beyond you, shut up. Don’t guess or try to wing it. In our connected age, titles no longer automatically translate into respect for one’s utterings. It’s what you actually say that is judged. – AH
Watch the CNBC video here
ALEC HOGG: Well, the International Monetary Fund recently said that South Africa is the worst performer of the BRICS countries and that its slow economic growth cannot be blamed purely on international volatility. Policy uncertainty, labour disruptions, electricity supply concerns also need to be addressed urgently according to the IMF, otherwise the country could be headed for disaster. Joining us now to share his views is Iraj Abedian from Pan African Advisory Services. Iraj, just to add to that; The Economist yesterday had an article – another article – having a swing at South Africa, this time saying we really aren’t getting it right. We don’t have the correct policies and at some point in time, these friends who are lending us money from the rich north might not be quite as eager to open their wallets.
IRAJ ABEDIAN: Absolutely right. South Africa is now the easiest target globally. Once upon a time – ten years ago – it was Africa, the hopeless continent.
South Africa is rapidly reaching that point where everybody can criticise it because it’s so obvious and it’s very tragic.
Our growth has come from highs of five percent to the current level of two – going below two, and policy-makers just have their heads in the sand and that’s very unfortunate.
GUGULETHU MFUPHI: Iraj, looking at that, the IMF also mentioned last week that they have concerns with regard to South Africa’s labour regulations. We’re aware of this information and it’s been out in the open for quite some time, but is this falling onto deaf ears?
IRAJ ABEDIAN: Looks like it, but it’s not just labour legislation. It’s other legislation, too. If you look in this environment, given what’s happening to the industrial relations in the mining sector; for the Minister of Mining also to add fuel to the fires so to speak by introducing some nonsensical, vague, indeterminate type of thing that ‘we will decide the price of coal. We’ll decide who we’ll export to. We’ll decide what the rate of capital investment would be in the mining industry’. These are elementary mistakes that ministers and policy-makers should stay out of if they don’t know. When in doubt you can ask and if you do make a pronouncement in this environment, make absolutely sure that the national interest is not compromised.
ALEC HOGG: What have we done in this country? At one point in time it all looked so good. We had smart people in government, smart people making decisions. It just seems like now we’ve got people who haven’t got a clue what they’re talking about, as you’ve just illustrated.
IRAJ ABEDIAN: Absolutely. What has happened is that there are three or four areas of socio-economic leadership and we’ve lost the focus of leadership in government. We can go with the labour issues, mining, agriculture, broader macro-economic cohesion. There’s an important foundation of economic success at the moment – lacking. Cabinet is much like any other coalition cabinet. It’s pulling in different ways and they think that by spinning by-lines you’ll be able to fool the market. You can’t. In the labour arena: once upon a time COSATU was a bedrock of fairly focused position. Even if you disagreed with them you couldn’t argue with their cohesion. At the moment, neither morally, politically, economically, nor from an interest of labour point of view; they are everywhere, except taking care of jobs and taking care of job security. If you look at the business sector – likewise – leadership in the business is also lacking. Businesses’ involvement in this arena is reduced to complaint and more often than not – silent complaint. Now all of that doesn’t take care of the national interests
GUGULETHU MFUPHI: Do you think that they’ve been put in that position? It’s not very often that you hear people say their businesses have been brought out to complain.
IRAJ ABEDIAN: They’ve been muscled from time to time and they stuck their heads out once or twice. They’ve been chopped and hit, but the role of business is not to keep quiet. Of course the way business in a globalised environment operates, is that when the going gets tough in one country, they take their capital and go to the rest of Africa. The fact that, for the first time in our modern history, our neighbourhood is no longer poor and unpromising, you can take your capital anywhere north of Limpopo and you’ll get fantastic returns. The involvement is much more favourable and that’s a new thing too, and our policy-makers are not alert to it at all.
ALEC HOGG: It was interesting in that economist’s piece where they said that businesses are complicit in all of this. Businesses actually like the fact that we’ve got these labour legislations that keep competitors out from other parts of the world, which is a point that I hadn’t seen being raised before. And again, something is terribly dysfunctional here.
IRAJ ABEDIAN: I think that is also a short-term argument. You can’t keep anybody out from anywhere in the medium-to-long-term, except if you become inefficient and then you ask for protection and then it’s downhill all the way.
ALEC HOGG: What about infrastructure? This is supposed to be our big rescue. We have a President who says there’s a four trillion Rand infrastructure program. There’s a special group of people – we believe – in Parliament at the highest level, who are making sure that infrastructure will be spent and yet very little is trickling through.
IRAJ ABEDIAN: Lots of talk – very little action. Infrastructure, whatever we have – and it’s very important because this number keeps going up. Once upon a time it was R800bn. Now it’s four trillion. The number has gone up. Not because the number of projects has gone up; it’s because the delay in, for example Kusile or Medupi, has raised the price from R59bn to R160bn and not finished. So you can quadruple, you can throw money at the issue on the paper and talk of big projects, but what makes the economy go, is not how much money you spend on the infrastructure. It’s how quickly, on time, efficiently, good quality you deliver on infrastructure. That we have not seen.
GUGULETHU MFUPHI: Iraj, the outlook seems fairly dim compared to what you’re sharing with us and the story published in The Economist, but are there proposed solutions? Is there an economy that we can look at and take a couple of examples from them and implement them here in South Africa?
IRAJ ABEDIAN: Interestingly enough, all our problems are very simple. It’s not complex issues. To get Medupi and Kusile or road infrastructure or municipal infrastructure; these are run-of-the-mill for any economy. To crack them, you don’t need to be a so-called rocket scientists. You’ve got to get the political corruption out of the picture. You’ve got to put competent people in charge. Remember, we’ve done it in 2010. We staged a world-class 2010 soccer spectacular, right? How did we do it? We put the right people in charge. We coordinated. We got the politicians to do what the politicians should do, which is ‘make policy in every environment’. Do not get into tenders. Do not get into appointing the wrong people in the wrong positions. When things go wrong, even if it’s your own appointment; do not be complacent. At the moment we have political ideology and political strengths wanting to do economic infrastructure. It doesn’t work that way.
ALEC HOGG: Just to close off with – the reaction to BMW… BMW is a global company. It says ‘if you carry on with this nonsense we might actually look elsewhere to do our investments next time’ and the reaction from labour is ‘stop blackmailing us’.
IRAJ ABEDIAN: No, but that’s because they don’t understand it. Labour is being defensive because it’s on a self-destructive path and there is no other way to describe it. To deny or to ignore what BMW is cautioning us is really at the expense of self-destruction. To me, it’s a sabotage of national interest. Politicians are quiet with the exception of the Minister of Finance who is just mildly being concerned, but he must come out with guns blazing. The cabinet must come out and say ‘look, this is not the way to position ourselves for foreign or local investments’. We always complain about hot money, not foreign direct investment, or local direct investment. But please, if you want direct investment you’ve got to make sure that the environment is right.
ALEC HOGG: It’s a lack of leadership again – the issues we’ve been talking about for some time.
IRAJ ABEDIAN: At the end of it, Alec, it’s lack of leadership at the moment in government, first and foremost, in policy cohesion, in unions at the moment – because their leadership is applied elsewhere, and to some extent – business.
ALEC HOGG: So why are the leaders so poor?
IRAJ ABEDIAN: I don’t know. One can hypothesise all things, but when a government becomes complacent and does not feel any threat to its judgment, to its accountability, we do get in distress. Remember, all countries do from time to time become complacent. At the moment South Africa is going through a very tragic, self-destructive period of complacency.
