RW Johnson: How Davos investors would have questioned Cyril – if SA wasn’t off their radar

Key topics.Investment rules scare off foreign investors.ANC policies echo apartheid-era failures.G20 risks exposing South Africa's decline..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..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..If you prefer WhatsApp for updates, sign up for the BizNews channel here..By RW Johnson___STEADY_PAYWALL___.President Ramaphosa, plus a large entourage of ministers and private sector CEOs, have, at great expense, attended the World Economic Forum in Davos. Ramaphosa uttered the usual bromides about South Africa being "open for business" and how much we welcome foreign investment. Most of the Davos guests will have simply ignored this, knowing that South Africa is notorious for corruption and economic stagnation. A pity: if they were to bother they might have asked some of the following questions:.South Africa has in recent time done away with all the various investment protection treaties it used to have. This was bound to alarm foreign investors. Why did you do that?You recently approached Elon Musk about extending his Starlink service to South Africa but he replied that he wasn't going to give away 30% of his company to anyone, a reference to your BEE legislation which requires companies to have at least 30% black ownership. Almost all other companies feel the same. Surely you realise that you will need to relax this rule if you are to gain any significant FDI? South Africa has passed a law explicitly allowing the state to expropriate anyone's property without compensation. Are you actually trying to scare foreign investors away ? It seems so.Your Mining Charter demands that any new mine must have 30% black ownership. In effect this means that any new miner will have to give away 30% of his company. So no new mines have been started in over a decade and as a result you have more and more unemployed mine workers. Surely it is obvious that this is a hopelessly mistaken policy and that it has failed ? If you are serious about economic growth you should get rid of this Charter and do everything you can to promote new mining investment.You are currently bringing in a law which requires all businesses with more than 50 employees to reshape their work forces so as to mirror South Africa's demography. This flies in the face of economic rationality for the necessary skills required for a successful business are not at all equally distributed among all population groups. If you wanted to achieve this effect you should have been making a large educational effort over the last thirty years to ensure these skills were more widely spread, but you have not done that. So in effect you are going to try to force businesses not to employ people on merit..Do you not realise that almost no other country tries to make business behave in such an irrational way ? This might as well be called the Prevention of Investment Act..Read more: BizNews Briefing – Ramaphosa drives GNU onto rocks; DeepSeek smashes tech stocks.6. Finally, you have passed the NHI Act which, when implemented, will have the effect of depriving South Africans from using private medical care, which currently affords them the highest quality care available. Business associations have warned the government that most business executives and managers are completely unwilling to forgo the best medical care for themselves and their families, so the implementation of NHI will cause many of them (and probably also a majority of doctors) to emigrate. This would cripple the South African economy. How can you possibly expect anyone to invest in South Africa when you are planning such self-destructive moves ?.The point is that our government really needs to have to face the fact that most of the rest of the world regards laws like the above as both laughable and contemptible, which is, of course, exactly the same attitude they had to our old apartheid laws. This similarity is not an accident for the ANC is a true apartheid party, trying to mirror the apartheid laws and bend reality into the shape it desires so as to conform with its racial ideology. And, just like the apartheid government, it finds the obvious liberal, laissez-faire alternative – do what is economically rational and simply ignore racial factors – to be entirely unacceptable. But, of course, in the long run the ANC's racial ideology is just as doomed as the old apartheid thinking was..One reason why the government needs a sharp lesson in how the world reacts to its thinking is that South Africa is about to host the G20 and, to put it mildly, the South African representatives are going to come up against a lot of international players who are cleverer, better educated and who don't share any of the ANC's deeply parochial thinking. To be blunt, there will a big gap in sophistication and the ANC side will be way out-classed..If one adds in the fact that most of the meetings will be in Johannesburg, there will be no disguising the fact that the ANC have wrecked this city, that the traffic lights don't work, that it still suffers power cuts and now water cut-offs. Put all this together and one has the making of a huge PR disaster..Top of South Africa's G20 agenda is the African debt problem. At Davos Ramaphosa suggested that some Western countries have a number of unused SDRs (Special Drawing Rights) at the IMF so why not just hand these over to African countries ? This seems somewhat far-fetched. SDRs are allocated to countries in proportion to their quotas – the financial resources they are obligated to contribute to the IMF – and all voting at the IMF is in terms of those quotas. Any allocation of SDRs requires an 85% majority at the IMF and since the US has 16.7% of the vote, it has an effective veto. It is difficult to imagine the Trump administration agreeing to simply donate such a bundle of resources to African states, even if the Western countries to whom the SDRs belong were to agree. After all, quite a few wars are going on in Africa and most African regimes are corrupt. Handing over more resources to African governments could well mean that the money gets spent on arms or on swelling the Swiss bank accounts of African dictators..True, many African countries are deeply in debt and desperately want debt relief. South Africa feels very good about leading with this problem since it enables them to play the role of continental leader, speaking up for the down and out. In the ANC view, of course, African countries are all victims and on the other side are the big bad Western banks, so it's only right to demand that Africans should be forgiven their debt or at least allowed to pay only some of it. At the same time, of course, Ramaphosa will also demand that the IMF and World Bank give Africans a lot more seats on their boards..Western leaders have heard all this before, many times. They know that there was a major African debt crisis in the early 2000s. A lot of debt was then written off, loan periods were lengthened and lower interest rates applied. This produced happiness. But then African states immediately rushed out and borrowed a whole lot more, which is why they are in trouble again now. The basic problem is that they borrow too much and make assumptions about their future growth rates and rate of productivity improvement which turn out to be far too ambitious. This merely means that they are very bad risks which is why Western commercial banks have stopped lending to them altogether, so almost all their debts are owed to the IMF, World Bank or other multilateral or state institutions of one sort or another..Read more: Alec Hogg's Davos Moments: From Ramaphosa's fizzle to AI's sizzle.So the big question for Western leaders is how to stop this merry-go-round. In essence, many developing countries tell a whole lot of fibs about their determination and likely ability to repay. This is why Ghana has already had 17 IMF bail-outs and Pakistan has had 25. Each time these countries give promises of their future financial conduct – promises which in fact they never keep..As for giving African states more seats and votes at the IMF and World Bank, why on earth do that ? They will all simply demand that more and more money be lent and that more and more African debt be written off. That would quickly end in bankruptcy, which is why it would clearly be suicidal to give debtors more control over these institutions. .This scenario is reminiscent of South Africa's Land Bank, which has the virtuous function of lending to struggling black farmers. But most of those farmers go bust and very few repay their loans, which is why the Land Bank has twice gone bankrupt under ANC rule. Slowly, very slowly, the ANC is realising that this business model simply doesn't work. So why demand that that model be applied internationally ?.The Economist has been running stories about why Africa has been falling further and further behind all the other continents. Their basic conclusion is twofold: that if Africa is going to catch up it will have to lift itself up by its own bootstraps. One can no longer think that this can be done through aid or political magic solutions. .Secondly, elite pacts between politics and business lie behind the prolonged growth spurts which have seen so many East Asian countries take off economically. Effectively, the political and business elites realise that high growth is the answer to most of their problems and each side moderates their demands in order to secure that. Such pacts are much rarer in Africa though, interestingly, the Economist suggests that the relatively high South African growth of the 1990s resulted, effectively, from such a pact between the new African political class and the white business class. .The implication is that this pact broke down because of the insistent pressure of the ANC elite, pushing through more and more demands in the teeth of economic rationality – BEE, equity employment, the over-hasty Africanisation of the civil service, the failure to maintain Eskom etc – and climaxed, of course, by the frenzy of looting under Zuma. Even the more rational parts of the ANC, after all, were pushing towards a mythical "national democratic revolution", not a growth pact with business..This notion of a broken pact is an interesting perspective. Ramaphosa's term has seen a desire to revive such a business-politics pact, with a strong emphasis on securing more investment and with business brought in to assist policy implementation. But it also illustrates how far away we remain from such a pact. Ramaphosa has simply lacked the nerve or will to put ambition for growth at the centre of his effort. He would need to abandon the NDR, undo most of the legislation mentioned in the first part of this article and frankly embrace a good deal of the "neo-liberal" agenda. .None of this has happened and current indications are that the ANC would rather stick with its current policies even if that means the party falls to pieces in the next few years. Indeed, the situation has begun to be reminiscent of the early 1980s when everyone could see that apartheid couldn't last much longer, even though it remained the government's official policy. In the same way now, ANC policy has resulted in the world's highest unemployment rate and a GDP per capita which steadily falls, year after year. It is impossible that this can continue for much longer..Yet the government goes on with the same old policies as if the laws of political economy have been suspended. But no one can suspend them and any government in the world which produces such results is bound to fall. So we already know that things cannot and will not go on like this. In the 1980s there were endless conferences about planning a post-apartheid South Africa. In the same way we really need to start thinking about planning a post-ANC South Africa. .Read also:.Ramaphosa's State Enterprises Bill sparks centralisation fears🔒 Ramaphosa's leadership tested as GNU struggles to deliver on renewed optimism: Justice MalalaTrump could take the shine off Ramaphosa's G20 Presidency – Dr Jakkie Cilliers ISS

RW Johnson: How Davos investors would have questioned Cyril – if SA wasn’t off their radar

Related Stories

Mayor first, party leader second: Geordin Hill-Lewis on why Cape Town beats a cabinet seat

Old School SA’s Stellenbosch brothers riding Bafana Bafana fever sweeping the country

The hollowing out of Eskom: De Ruyter's prophecy becomes reality

Beyond the metros: Where SA's real political battle in November is brewing