What's needed to lift investor confidence

South Africa faces a perilous and uncertain future because of stagnant growth, policy uncertainty and ideological gridlock, high unemployment, inequality and poverty. Social tension is very high as indicated by a high frequency of service-delivery protests across the country and an increasing level of anti-social behaviour that morphs into the current high-crime rate. The frequent illegal strikes in key industrial sectors are symptomatic of a turbulent labour market that also needs urgent legislative reforms to improve opportunities of access. Underlying this unstable scenario is the reality that very few people are employed.

Our high unemployment numbers are a clear indication that, in simple terms, we are not creating the kind of industries and enterprises that are able to absorb the high number of the unskilled people we have. Global experience has demonstrated conclusively that enterprises that operate successfully in this market segment do so under very tight margins. And in many cases they do so under varying incentive support schemes from governments that are motivated by need to provide jobs and improve the living conditions of their citizens.

This takes us into the area of policy choices. Our industrial development strategy and policy over the last 20 years has been tilted more towards allocating a substantial amount of our resources to the high-tech sector. This sector requires a higher level of skills compared to the mass-employment sector that would benefit the majority of our unskilled labour. This deliberate tilt reflects the ideological bias and influence of Cosatu which is a key member of the governing ANC alliance. Their admirable mantra is a decent job and a decent wage.

The challenge we have is how to achieve, to a reasonable extent, these desirable objectives without denying the unskilled working population the opportunities to gain basic skills in the enterprises that can operate successfully in the mass-employment sector. A convincing argument has been made by a number of policy analysts that this sector can be strategically grown if appropriate wage subsidies can be provided by the state as part of an integrated strategy to promote employment creation. Governments that have been faced with the level of unemployment challenges similar to ours have adopted this route in order to create jobs and contain potential social instability.

Our social-welfare budget currently supports more than 16 million recipients in different categories. Given the fact that our population growth exceeds the rate of employment creation, our dysfunctional public education system continues to consistently produce a high number of unqualified people who are unemployable. Job shedding is accelerating in sectors that employ low-level skills, private-sector investment has all but dried up and we will soon not be able to sustain our welfare budget at current levels. The scenario calls for a radical policy re-direction that will require difficult decisions to be made urgently.

It is not the intention here to provide a comprehensive list of where such difficult decisions are necessary and urgently required. The following few examples illustrate the theme of this paper.

One: We need to develop a compelling and shared economic development strategy and vision that will focus all of our attention to a few selected sectors that can catalyse growth urgently and in a sustainable and inclusive fashion.

Two: We need to boldly tackle and remove all factors that negatively affect our investment climate. For example why is it difficult to immediately legislate for a compulsory need to carry out a verifiable secret ballot before a decision to embark on a strike is made? By such a seemingly small but bold act, a very significant deterrent to domestic investment decisions will have been removed.

Three: The City of Johannesburg is currently under siege by the South African Municipal Workers’ Union using an illegal strike and the authorities seem completely paralysed and helpless. This is not the first illegal strike in the country. The mining industry has been brought to its knees by such strikes. A clear message has been confirmed to the investment community that the government lacks capacity and wilfulness to execute its mandate. It also confirms the view that the governing party is incapable of implementing its manifesto of improving the lives of all the people.

Four: One of the key factors driving the poor performance of the public school system is the inability of the department of basic education to implement performance-based contracts for principals and teachers because the South African Democratic Teachers Union has literally prevented the department from doing so. The question is: Who is in charge? And why is it possible for this to be done in the Western Cape and not countrywide?

The answer to all of the above is the problem we’ve been dealing with for quite some time now. There is an absence of visionary and decisive leadership to take the country forward. At the centre of this problem is the need for the ANC to finally accept that whereas the alliance was a useful entity during the struggle for democracy and freedom, the 21st century challenges and needs of the citizens require a well-structured organisation with a focused set of strategic tools and visionary and decisive leadership to meet their expectations.

Wisdom dictates that such an organisational transformation must be done willingly and proactively rather than being forced into it by contextual circumstances because this option has a very high potential for existential risk.