Seeing the national police commissioner in the dock ― and the leader of a political party getting a custodial sentence from a court ― this week are simply the latest and most high-profile events in a flood of events involving the criminal justice system, commissions of inquiry and parliament.
The question is whether this is growth-positive or negative. The mood in corporate South Africa, and among onshore and offshore investors, seems to be more the latter. It is important to consider why.
It is certainly positive that the wheels of justice grind forward, but while not a surprise the revelations of the level and depth of corruption in particular reframe the post-state capture period narrative and don’t look positive.
The post-state capture period saw the taps of large-scale corruption being closed, in particular at state-owned enterprises and various state institutions. Yet at only about R500bn under the Zuma administration this raised the question of why the number was so small and how a decisive turning of the corner could come from preventing such a relatively small amount of money from being looted.
The limited amount of looting stopped and limited justice and accountability meted out since 2018 have jarred strongly with people’s hunches about the real state of affairs. This is ultimately why Shamila Batohi lost public confidence long before her disastrous Khampepe commission appearance. There was a credibility gap.
The same is true now about criminal justice system leadership more broadly in response to the sheer volume arising from the post-Mkwanazi processes and Madlanga commission in particular.
Psychologically we have not hit the bottom yet ― we are at the stage where business leaders are having their fears confirmed, with an uncertain route to resolution. We face long, uncertain processes with a National Prosecuting Authority (NPA) of questionable ability undergoing yet another turnaround with an unclear likelihood of success, and a new leader who will only be in the post for two years.
Even if we assume everything goes to plan at the NPA, have we scratched the surface of state organ procurement corruption with 25% of total corruption cases going on? Surely not more than 50%? What about 10%?
All of this is even before considering the rise in kidnappings and extortion, generalised mafia infiltration into parts of the formal and informal economy, and assassinations of whistleblowers or those in a position to call time on the status quo.
This is not to say the government doesn’t have plans and task teams and productive partnerships with business and even a dose of leadership in these areas to prompt change. The issue is that the volume and complexity of the challenge do not match the speed of government action, nor indeed government rhetoric, even right from the top. Budget alignment and capacity levels clearly don’t match the need.
The simplistic investment narrative in South Africa is often about the rule of law. It is true regarding contract enforcement and other things necessary for businesses to operate. The problem is the speed of accountability and justice, and the ability to shift entire cultures and ways of thinking lodged deep in the public sector, particularly subnationally.
There is increasing debate about structural reforms and what they generate in terms of increased present and potential growth rates, and I am worried that as structural reforms advance and are completed, we are unlikely to see much additional growth.
Pressure then builds on reformers, and Operation Vulindlela in particular, with some saying the reforms are a waste of time. This conversation is already starting and is wrong.
Structural reforms to network industries are a necessary but insufficient condition for growth. They are like the conveyor belt through the machine, but far more is still required.
Worse still, the complexity of structural reforms and that we are now in the most complex, challenging and detail-orientated part of dismantling the status quo, for more efficient new competitive systems of network industries in particular, speaks to the fact that businesses need some underlying comfort blankets and guardrails to hang onto through this process to keep investment ticking over at levels above the replacement of depreciating assets.
It will be easy for the government to blame weaker growth this year on foreign shocks and geopolitical instability, as well as higher oil prices and lower global growth. But the counterfactual point is that even if this hadn’t happened growth would have still barely reached zero in per capita terms this year and next.
As we emerge from this global geopolitical shock and the focus remains on global diversification and the like, it will be useful to remember the basics back home. We must certainly not throw the baby out with the bathwater on reforms but focus on wider issues such as the criminal justice sector and industrial policy, which itself is an unmitigated disaster of contradictions.
Both are prerequisites for better sentiment, better productivity levels and higher GDP and employment growth.
• Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a South African research-led consulting company.
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