Automotive Business Review :: Editor's Letter
July 2018
   Automotive Business Review

Ever since our February 2018 issue, I have been dishing out political advice to all and sundry, albeit with the knowledge that I am just a kibitzer, or as many of my acquaintances call me, a space cadet. I accept that I am only a bit player, and as Lyndon Johnson would describe it, as someone outside the tent, pissing in. And I have no chance of getting inside the tent, so I will rather leave the sane and reasoned advice to an insider, Mcebisi Jonas, the former deputy minister of finance, who is now one of four special investment envoys appointed by president Cyril Ramaphosa. Jonas, a true hero in contemporary South Africa, gives us five actions that will help South Africa live up to its promise, which I obtained from an article in the Sunday Times of 27 May 2018. And by the way, for those who are wondering what the hell a kibitzer is, it is a Yiddish term for a spectator, usually one who offers (often unwanted) advice or commentary. That’s me, folks, so over to Mcebisi, who incidentally hails from the Eastern Cape, the crucible in which many great South Africans are forged.

How South Africa will emerge from Poverty – by Mcebisi Jonas

For South Africa to be successful, it has to create the conditions for business to succeed. This cannot be the responsibility of one person alone, even though there is always the temptation to rate the country through the prism of the presidency. Success will require cohesion in the government and a sense of common purpose among our citizens. That’s the message from those countries that have emerged from poverty and social strife in the past 50 years.

The challenge is formidable. Africa received just 3% of the $1.7-trillion in global foreign direct investment in 2016. South Africa’s share has fallen threefold in 10 years, to less than 0.1%. We must do better. Jobs follow growth. In order to achieve annual economic growth of 5% to reduce unemployment to acceptable single-digit levels over the long term, annual fixed investment growth needs to exceed 10% combined from the government, state-owned enterprises and the private sector. We must be honest with ourselves. There are political, policy and institutional dimensions to South Africa’s poor economic performance. It reflects investor fears about the likely reward versus the perceived risk, constraints in terms of the ease of doing business, and policy attractiveness as well as predictability.

Restoring integrity and efficiency to the government, and therefore confidence in the economy, must be our overriding objective. Our new government, led by President/Cyril Ramaphosa, has in just 100 days generated a surge of hope and goodwill in South Africa and around the world. The message of a “new dawn” resonates with the business community, with citizens, and with investors abroad. This message is being bolstered by fresh leadership in cleaning up the SOEs. The next months will be crucial in proving this commitment to change, and cementing a coalition of support for the new economic agenda. Our government has established an ambitious five-year target of $100-billion in fresh fixed investment. As the country heads towards its 30th anniversary of democratic rule, what can be done to create a country that lives up to its promise, harnesses its formidable store of natural resources, the advantages of its geography, the strength inherent in its diversity, and-the talents of its remarkable people, and restores its place as a gateway to the African continent?

Attempts until now to focus government policy through various programmes — the Nine Point Plan, the National Development Plan, the New Growth Path, et cetera — have failed on implementation. It is imperative to avoid the trap of vision without plans, plans without priorities, and policy without execution. Definable metrics are key to avoiding this trap, as is leadership and a capable state founded on meritocracy and performance. This is especially true in education, the bedrock of economic and social progress. The lesson from success everywhere is that it is impossible to separate trade, governance, bureaucracy, openness and efficiency, infrastructure and education from investment, growth and jobs. The imperative now is not to rehash old dialogues about policy, or rake over ideological coals, but to catalyse action on a systematic, practical basis. South Africa needs a positive narrative around its future, with which investors, local and foreign, feel comfortable. Five immediate actions stand out to generate inclusive economic growth:

Make it easier to do business - The administrative burden on business — particularly small businesses — of layers of permits and regulations must be reduced. Tax should similarly be a tool to facilitate SME growth. South Africa should aim to be in the top half of all of the World Bank Ease of Doing Business indicators within five years, and the fastest improver in Africa in the next 24 months;

Promote investment - Transform Invest SA along the lines of Singapore’s Economic Development Board, focusing its activities around metrics of growth, jobs, and the creation of a positive international profile. Our trade missions need to be tasked and held accountable to these goals, while we must become tech and financially savvy in using the same infrastructure to support SMEs;

Build skills - Only with a vast improvement in education will all children enjoy the same opportunities. The core problem is the quality of teaching. Fixing this will, however, take time. A short-term opportunity exists in generating broad-based BEE credits and/or using tax incentives to encourage apprenticeships, complementing and invigorating the government’s current Youth Empowerment Service programme;

Leverage Africa, access the world - Moving beyond the rhetoric of summits on trade areas, South Africa should undertake to devise a technology driven regime with the Zimbabwean government that guarantees passage at Beit Bridge in less than 30 minutes. After fixing Beit Bridge, we must apply the same formula in other border regional posts. And we must stick by our rhetorical guns on openness by pursuing multiple free-trade regimes from Singapore to Central America, which can only help to draw in companies keen to do business with the rest of Africa, and;

Fight Corruption - Corruption and state capture are primary concerns of local and international investors. To assure the public of the government’s commitment to restoring integrity and accountability, high-profile prosecutions must be completed, independent institutions must be strengthened, and the governance of SARS and the SOEs must be reformed. Progress has already been made on these fronts, but must be maintained in the future.

South Africa’s success depends on ending business as usual. If this can happen, a new dawn beckons.



 

 
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