Comparing South Africa’s political leadership to Saudi Arabia’s suggests that managing transitions is extremely difficult. Conversely, the United Arab Emirates (UAE) demonstrates what is possible through embracing sound commercial principles and prioritising global integration.
The leaders of all three countries want to be seen as visionaries with well-developed plans and much executive capacity. The reality is that the governments of both “SAs” are far too inward-looking to develop a workable long-term vision. However, a difference is that Saudi Arabia has a highly successful neighbour, the UAE, to benchmark itself against.
Saudi leaders have responded to Emirati successes by pursuing super-sized projects. Yet while the skylines of Dubai and Abu Dhabi are striking relative to their surroundings and the seemingly modest economic potential of that arid region, these bold visions were regularly reassessed and recalibrated, reflecting continual market feedback. While commercially minded leaders seek to exploit opportunities, they regularly test whether market feedback confirms their presumptions.
Dubai becoming one of the world’s most important aviation hubs traces to the rise of Asia and a long series of execution successes. The city’s success as a financial centre followed a similar path.
South Africa’s most impactful projects have been concentrated in the energy and transport sectors. There has been progress, yet electricity costs cripple the competitiveness of many sectors of our economy while greatly limiting the purchasing power of most South African households.
Like Saudi Arabia, we lack a vision that contributes to the global economy. Such thinking is largely absent from our national dialogue.
Our business leaders have sought to encourage a more commercial perspective by joining with political leaders in pursuit of investment-led growth. Among the reasons this has failed is that a commercially compelling plan has never materialised. To anticipate faster growth, investors need solid answers to basic questions such as who is going to buy what.
Our domestic purchasing power has long been stagnating at levels that entrench high unemployment. This has become a mutually reinforcing vicious cycle. It isn’t possible to break this anti-development cycle by simply increasing commodity exports. Most of our households are poor, overindebted or both. Increasing commodity exports won’t change this. Nor can Saudi Arabia create an abundance of good domestic jobs through exporting more oil.
The easiest way for a broadly uncompetitive economy to create a lot of jobs is to attract foreign tourists. Despite South Africa being far from the world’s more affluent consumers, international tourism has been our most fruitful job creation path. While we must continue to prioritise this sector, tourists aren’t going to solve our unemployment crisis either.
The easiest way for a broadly uncompetitive economy to create a lot of jobs is to attract foreign tourists.
Rather, we should acknowledge that the sector that has been most successful at creating jobs did so without placing high reliance on a grand plan. Efforts to encourage flights to South Africa were highly beneficial, yet it was the creative efforts of smaller businesses in the hospitality and related sectors that were crucial. Entrepreneurs in Cape Town and Dubai can tell of how they have discovered creative ways to impress international tourists.
We encouraged airlines to add flights, whereas Emirates created a huge aviation hub. Both efforts grew based on commercial efforts responding to consumer acceptance. The UAE’s capacity to develop and execute a bold vision is unusual. Our geographic positioning and geological endowments provoke political dispensations favouring isolationism. This is incompatible with developing a high-growth vision as that requires much more meaningful global integration.
Successful government efforts leading to more international flights serving South Africa’s airports reflected pragmatism, not a bold vision. Earlier generations of South Africans integrated into the global economy by building and exporting cars.
Today, rather than relying on grand plans, our value-added exporting companies should operate as if they were located in a free-trade zone unencumbered by the many layers of regulation that smother the rest of our economy. Many small commercially inspired visions can succeed where grand political visions would fail.
• Hagedorn is an independent strategy adviser.
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