WORLDVIEW: First power, now water – SA must get the basics right

The FT recently ran a story about AOL founder Steve Case's attempt to jumpstart growth in rural America through venture capital. Having noticed that most of the venture capital in the US goes to Silicon Valley and New York, Case decided that the best way to encourage growth would be to direct more venture capital at America's left-behind interior. .The FT article made the point that the problem with America's backwaters isn't actually a lack of financial capital – that's a symptom. The real problem is that most of the interior of the country lacks decent infrastructure and skilled workers. .The US spends less on worker training than most other OECD countries and has starved its infrastructure of investment for a generation. Sensible midwesterners and southerners with chutzpah and a college education move to one of the country's relatively well-connected coastal cities, leaving their unskilled peers stuck in decaying rural towns. .___STEADY_PAYWALL___.In other words, the reason the south and midwest are struggling economically is that they lack the essential ingredients of economic success..This made me think about South Africa. In SA, the government frequently discusses the need for capital and investment, and every year, announces ambitious plans for targeted financing and development programs..But at the same time, the state has been unable to keep the lights on and the water flowing. Cape Town made global headlines as a case study in water collapse and now Joburg faces days with no running water. Eskom can apparently only meet about 60% of the country's power needs on a reliable basis. .Meanwhile, South Africa's children perform dreadfully on global educational assessments. Kids aren't learning to read, write, and add. They are leaving school with a piece of paper and very little in the way of skills to back it up. .Like the left behind towns of rural America, then, SA does not have the necessary skills and infrastructure to make use of financial capital. The reality is that all the targeted investment funds in the world cannot overcome one fundamental issue: The South African government is failing at the basics. .Long ago, as democratic, capitalist countries developed, a division of labour emerged. The state took on responsibility for what we may call the "framework" of a developed economy – decent road, rail, and sea links, reliable power, potable running water, a solid legal framework and courts to enforce it, cops to keep bad elements in line, and education for the masses to ensure a steady supply of suitable workers. .It was up to business to provide the rest: ideas for innovative ways of organising production, financial capital and markets to allocate it, product ideas, supply chains, innovation and development, and all the rest. .The concept of the developmental state – a key plank of the ANC's vision – changes this balance. It envisages the state as a key player in directing investment within the economy, rather than leaving that side of things up to the market and private enterprise. .Now, whatever you may think of the notion, it should be clear that the developmental state can only work if the state is also taking care of the framework we discussed. You can't have both the state and private enterprise working on directing flows of capital and leave everything else to chance. .But that seems to be what's happening in SA. Government is full of ideas on BEE and the PIC's investment mandate and the best way to jumpstart small business, but no one seems to be making sure that clean water comes out of the taps and kids learn to read..The bald fact is that, without the basics in place, all the FDI in the world isn't going to help SA grow. What's more, as in the US, would-be investors understand this, which is why there's a lack of investment capital in the first place..If the ANC truly wants to unleash SA's potential, it should focus all its efforts on getting the basics right. It should invest in infrastructure, reform the schools until all South African children truly have access to a decent education, and make sure the country's legal framework is fair, sensible, and properly enforced. .Investment funds and schemes for economic pilot programmes are just window dressing (and a temptation to looters). Once the government has the basics in place, it can indulge in its love for business development programmes and whatnot. But without the basics in place, all that stuff is a waste of time.

WORLDVIEW: First power, now water – SA must get the basics right

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