Limping from policy disaster to policy disaster

It’s unusual to see a government that is on the face of it so entrenched in power — a solid 62% of the national vote after two decades in office, eight out of nine provincial assemblies — in such disarray. Yet President Jacob Zuma’s African National Congress administration limps from disaster to disaster, full of gung-ho public bravado but ineffectual in execution and constantly wrong footed.

Nowhere is the disconnect more obvious than in the eagerness to announce new policies, which turn out to be disastrous upon implementation. Eventually, after a long period of bluster and denying stark realities that are obvious to everyone except the ideological dinosaurs that created the policies in the first place, the government reluctantly backs off. By then, of course, the damage has been done.

The onerous tourism regulations introduced by Home Affairs Minister Malusi Gigaba are a case in point. From the outset, the tourism industry warned that they would be hugely damaging. Yet these pleas were ignored and the regulations implemented, costing South Africa billions in tourism revenue and an estimated 5 000 jobs before they were scrapped more than a year later.

This week Higher Education and Training Minister Blade Nzimande gazetted a surprise proposal on the future of the incompetent and corruption-riddled Setas — the 21 sector education and training authorities — which will in effect strip them of their current operational role. It is a belated acknowledgement, a mere dozen or so years too late, that these bodies charged with ensuring a steady stream of skilled labour across SA industry, have been a hopeless failure.

Despite the Setas getting more than R13 billion of annual funding, research shows that about 44% of SA’s unemployed cannot find a job because they lack the skills and qualifications employers want. This in a country where it is estimated that there are half a million vacant positions that cannot be filled because workers with the appropriate skills are not available.

Under Nzimande’s out-of-the blue proposal, 40% of the money flowing to Setas from the compulsory payroll levy that larger businesses pay, will now be diverted from sectoral training to a National Skills Fund. This fund will be centrally administered. In other words it will become the ministry’s own endlessly replenishable piggy bank.

The intentions are clear, albeit unstated. Already the Setas are being stripped of R1.2 billion from their budgetary underspend, to help cover the costs of the government’s foolish promise that there would be no university fee increases in 2016. Once the skills fund is operational, the temptation will be irresistible to continue bailing out an already cash-strapped university sector reeling under demands for “free” education, instead of training the apprentices and industrial workers that the Setas were set up to do.

These problems with tourism and training have had disastrous economic effects. However, they pale into insignificance when one contemplates the pain that is in store for the SA economy if the government persists with the folly that is the Protection of Investment Bill, which was passed in the National Assembly this week and now goes to the Council of Provinces for ratification.

The Bill, when enacted, will replace the bilateral investment treaties concluded with mainly European countries that are now expiring and not being renewed. It removes foreign investors’ right of recourse to international arbitration for the settlement of disputes and gives government the room it says it needs for investment regulation in the public good.

What European and American investors worry about, based on the government’s increasingly dirigiste tendencies, is a waning commitment to protecting property rights, the threat of expropriation, and pressure to meet a vague but always growing demand for “transformation”.

The chair of the EU Chamber of Commerce in SA, Stefan Sakoschek, was unusually blunt in an interview with the Financial Mail last week. “New investment decisions have been put on hold. And serious disinvestment decisions are next on the agenda.”

This is not mere posturing. Investors are already voting with their feet. Foreign direct investment in developing economies grew by about 2% last year. Except for SA. Here it dropped by 31% to $5.8 billion.

For now, Trade and Industries Minister Rob Davies is adamant that the Bill will benefit SA’s foreign direct investment flows. He is no less delusional than his cabinet colleagues Gigaba and Nzimande have proved to be. Expect a U-turn down the road but only after we’ve taken another economic drubbing.

Follow WSM on Twitter @TheJaundicedEye