What does every business need more than anything else in SA? Economic growth, obviously.
I recall a story many years ago about former Gordon Institute of Business Science dean Nick Binedell explaining to his class of senior local banking execs how important it is to get involved in SA’s political economy.
“How many of you are you competing to be the biggest bank in Africa?” he inquired rhetorically, at a time when African expansion was still the holy grail. Almost all nodded in affirmation. “And how many of you are willing to engage in the big political debates of the day here in SA that deeply affect society?” Crickets.
And that remains the problem. Too many business leaders believe politics is not their domain. If this continues, we may end up competing among ourselves to be the biggest businesses in Zimbabwe.
There is no successful business in an unsuccessful democracy. The Madlanga commission couldn’t even secure a venue before its start date. It is emblematic of a government long on promises and short on delivery. Editorials now describe urgency as rhetorical and delivery as optional.
But perhaps, paradoxically, there is a glimmer of hope. As Moeletsi Mbeki reminded me in a recent conversation, the most remarkable thing about the current national dialogue is not the circus of beauty queens and rugby captains paraded as delegates, but the fact that the ANC, the governing party of the past 30 years, has admitted publicly that it has run out of ideas. That is unique in African politics.
— SA does not suffer from too much capitalism, but too little.
Ramaphosa has, in effect, told the public: “I know your problems, but I have no solutions. Please, come up with them.” That, Mbeki argues, is both humiliating and strangely refreshing. Unlike Robert Mugabe in Zimbabwe and Frelimo in Mozambique, which clung to the illusion of omniscience, the ANC is admitting its exhaustion. The positive question is whether we, as citizens and business leaders, can fill the vacuum with real ideas and real action.
In a recent paper delivered at the FW de Klerk Foundation, Mbeki laid out with clinical precision the two fundamental blockages to SA’s growth:
- Our catastrophically low human capital index, the result of a failing education system that has consigned a generation to permanent disadvantage. SA ranks 132nd out of 169 countries on this score.
- The bloated cost of our public service. According to the IMF, public sector remuneration soaks up an extraordinary 17% of GDP. Middle-income peers spend about 7% of GDP.
Public sector wages consume more of our national income than investment does. Investment sits at 15% of GDP. If we simply reduced the state wage bill to peer country levels and redirected that 10% of GDP into infrastructure investment, SA could grow at 5% annually.
Of course, the political challenge is how to lower the cost of the public service. Organised labour has made that the third rail of SA politics. Touch it and you die. But if we cannot muster the courage to confront this we may as well accept 1% growth, 33% unemployment and slow, inevitable decline.
This is where Mbeki’s notion of a production-driven coalition becomes crucial. Our politics today is consumption-driven. That broad church demands redistribution without production. What SA needs is an alliance between the unemployed poor, desperate for jobs, and business, desperate for competitiveness. Both have a shared interest in production over consumption. Both have a shared interest in growth.
— There is no successful business in an unsuccessful democracy.
It is here that the private sector must step forward. For too long business has been cowed by accusations of “white monopoly capital” or painted as enemies of transformation. Yet, as Mbeki reminded me, surveys consistently show that the most trusted institutions in SA are civil society and business. Ordinary South Africans know who puts food on the shelves each morning. They trust what delivers. The myth of mass anti-business sentiment is exactly that — a myth.
The private sector is already showing what this looks like in practice. Consider the R7bn buyout of Curro Holdings announced last week by the Jannie Mouton Foundation. Freed from the short-term demands of listed shareholders, Curro will now be able to refocus on building long-term infrastructure, expanding bursaries and optimising capacity to reach more SA pupils. This is precisely the kind of productive investment Mbeki calls for. Not redistribution through inflated public sector salaries, but capital channelled into building the human capital base of the future workforce.
That a foundation linked to one of the country’s most successful capitalists sees more promise in fixing schools than in waiting for the state to deliver should tell us everything we need to know.
— Business must step forward to invest in human capital, not wait for the state to deliver.
The ANC’s “broad church” worked in the fight against apartheid. But, as Mbeki argues, you cannot run a modern economy with a party that is a “dog’s dinner” of communists, capitalists and populists all under one roof. Modern democracies organise around socioeconomic interests: parties of the left representing labour, parties of the right representing capital, parties of the centre stitching consensus. We need that clarity here.
Mbeki thinks an entirely new centre-right party is required, driven by business. This is where we disagree because I believe this could be the DA if it stops viewing itself and defining itself through the ANC.
For all its flaws, the national dialogue could serve as a platform to legitimise systemic reform, starting with electoral reform. Constituency-based representation would restore accountability, break the stranglehold of party lists and give citizens real leverage over their representatives. Without accountability, corruption festers. With it, we can begin to build a state that delivers.
But electoral reform alone will not be enough. We must break the intellectual stranglehold of failed policies. For instance, BEE has entrenched oligarchy, not broadened opportunity. By some estimates, R1-trillion in value has been transferred to fewer than 100 individuals. Inequality among black South Africans has widened. BEE has become a licence for rent-seeking, a tax on productivity and a deterrent to investment.
It is time to stop apologising for saying so. As The Economist bluntly put it: BEE should be scrapped. And we should be unapologetic about the role of capitalism. SA does not suffer from too much capitalism, but too little. Real capitalism — competitive markets, rule of law, protection of property rights, reward for innovation — is the only force proven to lift societies from stagnation to prosperity.
These are not new ideas. They are ideas we have been circling for decades. What is missing is courage.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at michael@fmr.co.za.
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