SA suffers from too much patience with what is broken

TRAVELLING through different emerging markets, or indeed anywhere, you get a sense of very different attitudes and priorities that make stereotyping inevitable. Having visited SA frequently in the past 10 years, it has continually struck me that in comparison with the many other countries, SA has a perplexing relationship with time.

Whether it is trying to sort something out now, right now or just now; or the all too often leisurely pace of Uber drivers; official meetings running late; or the upside of feeling slightly less guilty than in London if you are running five minutes late due to Johannesburg traffic — things are very different from London, certainly.

One result is the relaxed nature of queueing. Being very un-British (I blame my Mediterranean genes), I was once, many years ago, in a Clicks in Pretoria just before an important meeting, but had lost my voice. As I started to get visibly agitated at the length of the queue with one attendant on the tills, a diminutive, elderly woman in front proceeded to berate me loudly, recounting how she had to queue all day to cast her first vote for Madiba in 1994. I have not complained about queues since!

Perhaps it is a virtue to be patient like this, but also a virtue to want change and development. Here, SA’s relationship with time becomes problematic. This is especially true at the moment. Electors delivered a partial verdict to the ANC in the local elections. However, the ANC’s successes in development and the reduction of poverty since 1994, combined with patience, were clearly sufficient to keep the national vote share high — even given the drop it suffered. Such patience may well assert itself again in 2019, which is why I advise investors against thinking the ANC will inevitably lose at that point.

The ANC’s internal problems might be fine if the economy was chugging along creating 350,000 jobs every quarter and growing at 5%. But it is not, and a year and three months is going to be a long time for the status quo to continue. The national executive committee clearly exerts much patience. Patience is reinforced and extended by denialism (by some at least) and groupthink and hysteresis.

Foreign investors have been surprised by the amount of time it has taken in 2016 for the internal politics to grind forward. These are lengths of time that in a global carryhunting environment investors have struggled to come to terms with.

Patience thrives when difficult decisions and political capital are required. Herein lies a frustration. There is what the DA would call a jobs crisis, or the EFF a crisis of economic freedom. I prefer to call it a development crisis. Absolute poverty has been dealt with to a significant and successful extent, but now the next stage — the reduction of relative poverty, job creation and growth — is lost to too much patience with the status quo.

Patience should run out faster. New policies demanded and tried; 2017 is too far away, 2019 yet further. A sense of urgency not just for the headline unemployment numbers, but for each individual affected.

The passage of time will come into stark relief at the end of November and start of December with a flourish of rating updates and at least one agency downgrade, in my view. Ratings agencies may well run out of patience for meaningful potential growthboosting structural reforms at that time. More especially, on the anniversary of Nenegate on December 9 investors will be looking back on the whole year, judging the progress made in boosting current and longrun growth. A year for investors is quite long enough for a country in economic trouble to produce and implement the goods — as we see in countless other countries the world in need of reform.

Investors can show much patience when there is a credible commitment to meaningful reform with widespread political buyin. An IMF programme often helps in such circumstances to provide a straitjacket and additional credibility — even when it is not strictly needed because there is no balance of payments or banking crisis. Such programmes have worked very well recently in emerging Europe, especially in Romania and now Serbia, which have become popular for both the IMF and investors.

Time is important for investors — it allows the build-up of trust in policymakers, understanding and attachment to institutions and then their testing — something of particular importance at the moment.

However, time can cause complacency, as we saw in Nenegate, but also in investors pricing out the political risk premia from South African assets. But it requires very little time to see trust evaporate and institutional quality eroded.

This is the fear about the Treasury in the current environment, not just around the top of the structure but what could happen further down in the event of a political shock — and then how long it could take to turn around again.

Complacency can be dangerous, but the prevalence of shocks means it rarely lasts. State-owned entity issues have been there for many years, especially on tendering, but have come into focus only in the past few quarters. Similarly, I have been using the term “tenderpreneur” for the past several years, but it has only really stuck after Nenegate in December 2015.

However, some issues of time are more difficult to think about. A particular focus for me in the past few months, led by investors asking questions, has been the nature of the constitutional rule of law in SA. On February 4 2017, the current constitution will have been in place for 20 years. No doubt there will be some sort of celebration commissioned.

Is that not long enough for it to bed in? True, there is a lengthy period for the constitutional order to produce sufficient case law and interpretation through the courts, and this is still continuing. But is that not long enough for the spirit of the document to be respected at least? I think it should, though many South Africans tell me I should have more patience on this. The same argument could be made about the Public Finance Management Act.

A strong civil society, especially groups such as Organisation Undoing Tax Abuse and the Legal Resources Centre, are more recently accelerating this process of embedding constitutionality and establishing case law, although it feels like there is still a long way to go. We need to move from “ex post” constitutionalism (the courts dragging people into line after the fact) to “ex ante” constitutionalism (people’s respect for the spirit and letter of the law prevents issues from arising).

That point is coming closer and when it arrives, we think SA will be stronger and we can all worry about time a little less.

Until then, maybe some urgency to accelerate development might be useful — for investors, for political parties and for those who would benefit most from the country’s development.

A year for investors is quite long enough for a country in trouble to produce and implement the goods

Attard Montalto is senior emerging markets economist at Nomura in London.

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