If I were king: Turning around South Africa’s economy - Terence Corrigan

Key topics:South Africa struggles with low investment, poor growth, and high unemployment.Solutions focus on tackling crime, fixing infrastructure, and rebuilding institutions.Economic reform requires limiting state overreach and enabling private enterprise..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Terence Corrigan*.“With the greatest vigour he commanded that his chair should be set on the shore, when the tide began to rise. And then he spoke to the rising sea saying ‘You are part of my dominion, and the ground that I am seated upon is mine, nor has anyone disobeyed my orders with impunity. Therefore, I order you not to rise onto my land, nor to wet the clothes or body of your Lord.’”These lines are from the Historia Anglorum, an account of the history of England by the 11th century chronicler, Henry of Huntingdon. It relates an anecdote from the reign of King Canute of England (and later of Denmark and Norway too), where he was prevailed upon by his courtiers to demonstrate his omnipotence by commanding the sea to recede. Scroll forward a millennium, and I was reminded of this story.“If you were king, what would you do?” came a question from the audience. We were launching the latest of the Institute’s Blueprint for Growth papers, this one having to do with investment. Or rather, the lack of it. Fixed investment in South Africa comes in at around 15% of GDP, half the level that the National Development Plan envisioned for the country, and trailing even further behind that of its middle-income peers, whose aggregate approached 35%. From this follows the anaemic growth rate, South Africa’s chronic unemployment malaise, and the frustrated aspirations that threaten South Africa’s future. Investment is the issue that has to be addressed.The argument we make in the paper is that South Africa is just not an attractive investment destination, whether for local or foreign businesspeople. There are too many negatives to be considered to justify sinking money into the country. The reasons are legion: from deficiencies in the foundations of a modern economy, such as security of person and property, through to the most sophisticated, embodied in official thinking that fancies itself “developmental”, but whose impact is too often detrimental..Read more:.South Africa’s growing investment crisis threatens growth and infrastructure: Katzenellenbogen.This is especially the case when South Africa is ranked alongside any number of other emerging markets. As a US-based trade and investment analyst whom we interviewed for the study put it: “In isolation, [each of its problems] could be overcome, if South Africa were the only game in town. But there are countries like Colombia, Thailand, Peru, Chile. Similar opportunities, but with more promising growth prospects.”Playing “if I was king” lets us conceive of an environment unencumbered by gritty realities. It’s a mind game of a perfect world, where we can conceive of an ideal response to an existing set of problems. Royal power, is, after all believed to be omnipotent. How would I approach this?King Terence I of the Imperium Corrigani.A starting point is to realise that not everything is geared for a short-term solution. South Africa’s economic malaise has been decades in the making, and it will be the work of years to escape it. Not even the wisest and mightiest monarch could reset distorted systems by decree. To this, we must understand that a monarch’s power is dependent on the institutions that can carry it out. A king needs his tax collectors, sheriffs and knights (and on the darker side, the keepers of his dungeons). Given the realities of contemporary South Africa, this means that it will be necessary to prioritise the various imperatives.To my mind, three simultaneous paths of action are possible.The first is concerted work to rebuild the worn foundations of South Africa’s economy. This means arresting the state of lawlessness and rehabilitating the infrastructural systems.For me, the priority in dealing with insecurity would be to get a hand on the throat of organised crime. I’m thinking here of the various mafias that prey on construction and water supply, that traffic in narcotics, wildlife and firearms, that perpetrate cyberfraud or that have bored into the state. Given the state of policing, this is a tough task.Therefore, I propose to set up an independent agency along the lines of the erstwhile Scorpions. This would introduce close cooperation between investigators and prosecutors, and would go after the spoils of crime and those in the most senior reaches of the criminal world.I’d recruit the best and most aggressive to work in this, irrespective of their nationality. In fact, I’d rather like to draw on foreign expertise, since criminal syndicates are no respecters of borders. I’d ensure that they are appointed on merit, well remunerated and that they and their families are protected. I’d want to see some high-profile convictions, preferably with at least some of those being measured for their orange jump suits drawn from the political and administrative classes. South Africa needs not only to deal with crime, but to be seen to be doing so. We’ve had impunity for way too long.Meanwhile, we need to get infrastructure working again. Part of it will mean getting crime – both organised and petty – under control. Equally, much of our various systems are in dire need of rehabilitation.It seems to me that we’re at a point on crisis on this one. We need investment and proper stewardship of our infrastructural assets. I would concession out some of our infrastructure – logistics is an obvious one – and initiate public-private partnerships elsewhere. Strictly on a value-for-money basis. I’d also float infrastructure bonds to raise funds where the private sector might be unwilling to step in. I’m thinking of the disaster that is our municipal sector.That brings us to my second path of action. We need to rebuild our institutions. Institutions are fundamentally about people, so we need, well, the best people. On my first day on the throne, I will mandate meritocracy in appointments and promotions, and that managers must manage. No more diddling with demographic percentages or farming out thorny disciplinary issues to HR departments, where they can be gamed ad infinitum.I’m also not especially hung up on reserving state positions – especially senior ones – for South Africans. If we can get an excellent Pakistani or Rwandan to step in as DG of Housing, why not? Measure things by outcomes is my view.The same applies to the stewardship of public resources. Empowerment demands have been the curtain behind which a lot of malfeasance has taken place. It’s also ramping up the price of goods and services, with the bill handed to the taxpayer. Whatever good it may have done has now been overshadowed by the costs it is imposing. It’s out.The principle is simple here: start getting governance in order and the case for investment and for doing business in South Africa will start to look much more compelling.Thirdly, I am going to do what intelligent monarchs have done since the beginning of history: I’m going to recognise just how limited my powers are. Some things cannot be achieved by mere decree, and in some instances even trying to do so is a proverbial road to hell. So, I will be circumspect in what I, as king, attempt to do.The meddling of the state in the economy, way beyond its capacity – and with a capacity marred by compromised institutions – has done no small amount of damage. This has been the terrain of, for example, ludicrous industrial policies, threatening property rights through expropriation without compensation, demanding that investors cede portions of their equity and imperious decrees (royal in their own fashion) for firms to meet on pain of their bankruptcy.It’s hardly surprising that investment is at a distinctly low ebb. Another businessman interviewed for the study, a manufacturer, put the frustration in these biting words: “You can do something about individual problems. Security, infrastructure, all of that. You just can’t do much when policy is deliberately arranged to act as a truncheon against you.”Back to that seashore in Dark Age England. Following Henry of Huntingdon’s account: “But the sea carried on rising as usual without any reverence for his person, and soaked his feet and legs.”So, I wouldn’t try. I would trust the free decisions of people and businesses to make economic choices for themselves. They understand the limits and incentives as they exist. The South African state, in its current state, does not. It’s not fit for that purpose..Read more:.SA municipalities fail to deliver despite infrastructure funding surge.As I’ve argued before, successful economic reform – in places like Vietnam and Indonesia – has involved removing the grasp of the state from the economy, and increasing the freedoms of economic actors. There are limits to what even the most competent state is able to achieve. Any state intervention needs to be rationally justified, carefully weighted in terms of its costs and benefits, and consonant with the state’s ability to execute it. It is not just a matter of the exercise of power, but the judicious use of it. A “good” policy that cannot be implemented is not a good policy at all.This is part of the moral lesson of the anecdote of King Canute. As the water ran over his feet, Canute rebuked the foolishness of those who had tried to flatter him. “Let all men know how empty and worthless is the power of kings, for there is none worthy of the name, but He whom heaven, earth, and sea obey by eternal laws.”Rather than a lampoon of kingly arrogance and hubris, this tale was intended as homage to Canute’s legendary wisdom and humility. And a warning of the limits of temporal power. This is something that King Terence I of the Imperium Corrigani would pledge to respect.Indeed, our economic fortunes would be vastly improved if this lesson could be heeded today..*Terence Corrigan is the Project Manager at the Institute, where he specialises in work on property rights, as well as land and mining policy. A native of KwaZulu-Natal, he is a graduate of the University of KwaZulu-Natal (Pietermaritzburg). He has held various positions at the IRR, South African Institute of International Affairs, SBP (formerly the Small Business Project) and the Gauteng Legislature – as well as having taught English in Taiwan. He is a regular commentator in the South African media and his interests include African governance, land and agrarian issues, political culture and political thought, corporate governance, enterprise and business policy..This article was first published by Daily Friend and is republished with permission

If I were king: Turning around South Africa’s economy - Terence Corrigan

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