Institutions are pillars for growth and must be stable
It has been said that if you want to predict the prosperity of a country, it is essential to look at its institutions, because investors look for wellfunctioning institutions when making long-term decisions.
In a trying period of a technical recession and credit ratings downgrades, it has never been more pivotal for SA to position its core strengths and broad competitiveness to maintain investor confidence in our economy.
Regardless of current challenges, SA has diverse and notable strengths. One such vital strength lies in our institutions designed to strengthen constitutional democracy, which is essential for the promotion of socioeconomic development, thus translating into an enabling environment for the creation of wealth for our nation.
But why are institutions important? Through stable and predictable institutional arrangements, a country can mitigate risk. According to Business Monitor International’s Quarter 2 Trade and Investment Risk Report, SA is a regional outperformer in terms of comparatively low levels of investment risk.
This low-risk profile is ultimately linked to the performance of private and public sector institutions.
This means SA’s sound institutional framework, built on the foundation of a democratic Constitution, positions our country positively and it is through the independence of these institutions that we will be able to maintain business confidence.
Failure to protect our institutions can only result in eroded investor trust.
In a period when we have to recognise the urgency of the task of further sustainable transformation, institutions also have an important redistributive role to play — they can help ensure that resources are allocated, and that the poor or those with fewer economic resources are provided with opportunities for development.
Our democratic institutions are meant to shape our society. Their strength or weakness determines the depth and quality of not only our democracy but also our nation’s economic development and empowerment of its citizens.
When one analyses the factors that support institutional strength, the World Economic Forum’s (WEF) global competitiveness report indicates that the first, and most basic, pillar (there are 12) on which they assess an economy is dedicated to institutions.
Institutional capacity is then assessed on the basis of 16 measurements, including intellectual property protection, judicial independence, observance of ethics, levels of corruption, and government efficiency and accountability.
The WEF further states that “without strong institutions, progress in the other 11 pillars would not be easily obtainable”, as the annual assessment of the economic health of more than 140 economies is premised on the institutional frameworks.
In the WEF Global Competitiveness index 2015-16, SA was reported to have the continent’s most efficient financial market, goods and market efficiency, as well as strong institutions.
As the WEF points out, SA improved in nearly all the elements of competitiveness, including business sophistication, financial market development, infrastructure, innovation, technological readiness and the macroeconomic environment.
From a South African nation brand perspective, this means that to build a case for attracting investment, or to further diversify global relationships, it is essential to note some of the key attractiveness features of SA, and where necessary, strengthen these.
Trust in institutions is important for the success of many government policies, programmes and regulations. These institutions make up the fabric within which our citizens, businesses, political parties and the economy operate, and provide a framework of rules, norms and understood processes that are explicit and implicit.
It is incumbent on each one of us, as leaders from the public and private sectors, to champion and cultivate the development agenda to improve the socioeconomic state of our country.
I encourage all sectors to prioritise making SA the leading African economy it once was. Let’s protect our democracy by protecting our institutions.
ONE VITAL STRENGTH LIES IN INSTITUTIONS DESIGNED TO STRENGTHEN CONSTITUTIONAL DEMOCRACY