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Harking back to the Clinton presidential triumph on the back of his USA economic revival strategy in 1992, Paul Hoffman, SC, elaborates on three courageous steps he says South African President Cyril Ramaphosa and his reformists must take. This first and the third are conceptually simple, but tricky to carry out; trade in ideology for pragmatism on economic matters, and ease the structures of the labour dispensation. Tricky, because both involve totally redefining the ANC as it’s presently messily divided and constituted. The second step is a bit easier. Hoffman says the present structures of accountability aren’t cutting it, rather create a sharp-toothed Integrity Commission to overcome and speedily bypass the dead wood of the previous dispensation currently embedded in the newly-headed NPA. That way the world will far sooner see results from all the revelations and probes Cyril has achieved. Actual miscreants in real orange overalls will count hugely in restoring confidence in SA’s prospects. Hoffman says the president has fared well in restoring transparency, but without the human resource tools for NPA chief Shamila Batohi to confidently charge the State Capture miscreants, the drawn-out process will continue, something we can ill-afford economically. – Chris Bateman
The economy, stupid.
By Paul Hoffman*
Although the phrase “it’s the economy stupid” has found its way into the lexicon of politics worldwide, in fact, the Clinton campaign strategist who came up with the notion in Clinton’s successful 1992 campaign for the US presidency actually said “The economy, stupid” when asked to identify the three main planks of the campaign. (The other two were “change v more of the same” and “don’t forget healthcare”). How little things change in politics.
At the time, the USA was in recession and the economy was indeed “front and centre” in the concerns of the nation. In SA today we are in a similar situation with the revelation that the number of active job-seekers without work, those who have not given up trying to find a job, has risen to 29% with a startling youth figure component of that sad statistic set at 56,64%. There are over 10 million fellow citizens currently involved in the many depressing dilemmas workless-ness creates.
All does not have to be gloom and doom. Unlike his predecessor, the current president is alive to the fact that jobs will flow from attracting new investment to SA. His $100bn campaign to attract new investment is well-meant, run by capable people and would, if successful, address the problem of unemployment and the flagging state of the economy like a magic potion. The president actively supports the campaign by, for example, reiterating his government’s commitment to the rule of law. However, there are headwinds and, disastrously so, the campaign appears to be flagging.
What is it that keeps the investors from investing, whether they are local or foreign?
It is suggested that there are three eminently doable “quick fixes” that would, with the appropriate level of political will, be rapidly effective at getting the campaign back on track. All of them relate to improving the mind-set of cautious investors who are interested in what SA has to offer. We do have great fundamentals, but far too many potential investors are hesitant to invest at this time.
The three necessary steps to improve investor confidence to the point that they trust in SA sufficiently to actually invest involve:
- trading in ideology for pragmatism on matters economic;
- efficiently countering corruption, and
- easing the strictures of the labour dispensation.
All three are attainable at no great expense.
The first issue concerns the need for SA to be seen to be an economically pragmatic nation, not one of doctrinaire ideologue pursuing some outdated and irresponsible dogma that has not ever worked for investors anywhere in the world. Trading in attachment to the tenets of the National Democratic Revolution (NDR) for a healthy dose of pragmatism is surely not beyond the capacity of the governing alliance. It will involve clipping the wings of the “radical economic transformation” faction of the ANC and may possibly involve the break-up of the alliance. The unionists and communists are likely to be more attached to Leninist dogma that the modernists and reformers in the governing alliance. Putting country first and ending the schizophrenic factionalism that ranges from traditionalist to modernist, revolutionary to reformative is long overdue.
At the moment the chances of attracting new investments (let alone new investors) are being actively sabotaged by the loudest noises emanating from Luthuli House. Imagine the impact of a statement such as that made by the secretary general of the ANC, on Nelson Mandela’s birthday last month:
“Our national democratic revolution is at a crossroads, bombarded by the most vicious, deceptive, manipulative and dishonest propaganda led by the SA white monopoly capital in collaboration with international capital … their ultimate aim is to destroy our beloved country…”
Really, SG Ace Magashule? There is no “dexterity in tact” ( a revolutionary requirement) in what you are saying in public. The investors being targeted by your president’s campaign are paying attention and are trying to make some sense of what you say. How do your words quoted above land on “international capital?” How does it affect the decision-making of local business, awash with cash and near-cash, but too nervous to take the plunge? How do your sentiments stack up with the commitment to the rule of law expressed by the president during the parliamentary debate on his budget vote?
“Not well, not well at all”, is the common response to all the questions posed above.
An announcement that the NDR has been scrapped by Luthuli House after a special meeting of the NEC to address the economic crisis in SA is long overdue. There is no sense in being a “revolutionary” and in government at the same time. There is no sense in asking for new investment while toying with the notion of confiscation of property. There is no sense in tinkering with the long-standing and successful architecture of the SA Reserve Bank for purely ideologically driven reasons that simply make possible new investors nervous. The revolutionary struggle ended in 1994 after a national accord was forged. There is no enemy now, only one nation that is meant to be united in its diversity and committed to respecting and protecting the numerous human rights that are supposed to be constitutionally guaranteed to all who live and work in SA.
There is a fear among investors, both current and potential, that SA is soft on grand corruption, that the rule of law, in the sense of a functional civil and criminal justice administration, is under stress or even not intact, and that a culture of impunity is abroad in the land.
The new prosecuting authority boss, Shamila Batohi, pours endless energy into making excuses for the paralysis of her administration. The corrupt are not arrested, not brought to trial and not punished. These facts are noted by those in a position to invest in SA and they give cause for pause. The NPA will take years to mend. It is infested with baddies, deployed cadres of the revolution and also too many of those too fearful to do their work – the group of “won’t workers” who sit around shuffling papers and waiting for their pensions. The way to address the various dysfunctions in the criminal justice administration’s ability to tackle grand corruption, state capture and kleptocracy is to create a new Chapter Nine Institution, the Integrity Commission, to investigate and prosecute those involved in these nefarious activities. A few big-wigs in orange overalls soon will boost business confidence, promote trust in the strength of the rule of law in SA and attract new investments as a felicitous result of doing that which the Constitutional Court ordered up in the Glenister litigation in 2011. If the president is sincere about the commitment of his administration to the rule of law, he should read up the majority judgment in Glenister II, a judgment which binds his administration, and hang his head in shame for even suggesting that his government is strong on the rule of law. It is not, and it will not be until that judgment is properly implemented. Work around solutions like the new Investigative Directorate, wholly under the control of the executive branch of government, won’t do, even as the stop-gap solution which it is recently conceded to be. There is an urgent need to rake back the loot of state capture. Nothing doing on that front sounds alarm bells to all investors, current and potential. The Integrity Commission could search for and seize the loot.
The third way to kick start the economy is to make it easier to hire and fire. Too much red tape, the growth of a worker aristocracy in which those workers who have jobs greedily prevent those who don’t from ever getting into the labour market, and the laws that make for “fair labour practices” that are too fair to the worker and not so fair to the employer, are putting a dampener on the prospects of successfully addressing the horrific lack of jobs in the country as well as the unemployability of too many young people whose quality and relevance of education is sorely lacking.
With pragmatism in economic policy, an honest approach to tackling grand corruption and a tweaking of labour laws and policies, the status of SA as an investment destination will soar and the fears of those who see a death spiral or a train smash looming will be dispelled.
The president needs to take charge of those in Luthuli House who are actively sabotaging the good outcomes he is trying to achieve with his $100bn investment drive. He should start with Ace Magashule, whose utterances quoted above border on treason and certainly do nothing to help the 10 million mainly youthful jobless people in SA today. Ace is no friend of the poor, ask around Vrede, if you are unsure.
- Paul Hoffman, director, Accountability Now.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.