The economy of SA as an election issue

By Paul Hoffman*

RW Johnson, in an interview with Alec Hogg, castigates the DA and its MPC allies for their lack of attention to the parlous state of the SA economy as an election issue. Dion George, DA finance spokesperson, responds with his five point plan.

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 only about 39% of people aged 15 to 64 in South Africa have a paid job, considerably below the OECD employment average of 66%. 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 $100 billion 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. Paying lip-service to the rule of law is not helpful and does nothing for investor confidence.

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 to succeed. 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 outmoded (and frankly inappropriate) 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 ideologues 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, revolutionaries to reformists 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.  Not too long ago the then secretary general of the ANC was recorded as saying:

“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…”

“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 ? There is no “dexterity in tact” ( a revolutionary requirement) in what you said 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 again and again?

“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. All elected politicians are sworn to uphold the rule of law and the Constitution.

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 prosecuting authority boss, Shamila Batoyi, pours endless energy into making excuses for the paralysis of her administration. The corrupt are not arrested, not brought to trial and not punished.  She admits that the rule of law is “in the ICU on life support” and that the NPA is infested with what she calls “saboteurs”.

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, or as the DA would have it “the Anti-Corruption 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 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   Investigating 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. The IDAC Bill, currently under consideration by the National Assembly, turns back the clock to the status quo when the Scorpions operated; IDAC will be as vulnerable to closure as the Scorpions. It will not be “Glenister compliant” for want of independence, secure tenure and a guaranteed budget.

There is an urgent need to rake back the loot of state capture. Nothing or very little happening on that front sounds alarm bells to all investors, current and potential. The new Chapter Nine body 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. Minimum wage laws should not apply to the under 25 year olds in order to give them access to the workplace.

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 $100 billion investment drive. He should start with  the doctrinaire ideologues whose utterances border on treason and certainly do nothing to help the over 10 million mainly youthful jobless people in SA today. The ANC is currently a stranger to the rule of law and certainly no friend of the poor and the unemployed.

All political parties that are serious contenders in the upcoming general elections should commit to an anti-corruption stance and all voters should be astute to cast their votes accordingly.

Read also:

• The ANC’s geopolitics and the National Democratic Revolution – Paul Hoffman
• “Bye, Bye Busi”…not a moment too soon – Paul Hoffman SC “If I perish I perish” – Busisiwe Mkhwebane
• Paul Hoffman unpacks the IDAC bill: Permanent solution or pre-election ploy?

*Paul Hoffman is a director of Accountability Now.