Imagine an autonomous council presiding over the fulfilment of economic ambitions
Iarrived back from an overseas trip last week and sat down to flip through the news channels for a quick catch-up on how things were going on the home front. I found myself lurching from one crisis description to another. Glancing through the Sunday papers hasn’t helped. Our problems have spread beyond individuals. We are on the brink of systemic disintegration.
I’m a firm believer in democracy and I can’t suggest an improvement on capitalism, but they both have their faults. I’m not suggesting autocracy or monarchy or any other form of government as an alternative, but the populist vote does not always deliver the best allround leader into the most powerful position.
It is now practically common cause that capitalism has failed to deal with economic inequality through the trickle-down effect from the wealthy to everyone else, through the investment of excess capital.
Business is often no different. It is the individual depositors that created the banking institutions that failed in the 2008 financial crisis.
But they didn’t get bailed out, the banks did. The same management that presided over the mess got rescued, not removed. Surely, we should have given the depositors back their money, in full, and let them decide which banks they trust?
SA, there can be no doubt, has a socioeconomic mandate, but I have come to the conclusion that it is difficult to manage those two initiatives effectively within the same governance structure. Social is one thing, economic quite another. Maybe a separation of the two will achieve a better result?
In a country that requires radical economic transformation to ensure its very survival, we urgently need to develop a structural solution.
The Constitutional Court is being required to play an increasing role in our society. Its bench, the 11 judges, are appointed from a list drawn up by the Judicial Service Commission. Its membership is roughly split evenly between politicians and the judiciary. The process is exhaustively consultative and the result is a balance.
It has the final say and its mandate is enshrined in our Constitution, which is founded in values and rights to which we all subscribe. The primary economic rights that are appropriately its responsibility to deal with include rights to housing, health, and education and more generally, an acceptable standard of living for all.
Beyond the ultimate responsibility for law and order (in its broadest sense), a case can be made for an equally autonomous, similarly elected, predominantly apolitical, enduring and experienced economic council to preside over the fulfilment of the economic ambitions of our country, and all of its peoples. Initially, the mandate of this Economic Council of South Africa (ECSA) would be significantly influenced by the need to find, and fund, solutions that tackle economic inequality.
We surely have to move away from the structurally flawed models of black economic empowerment that primarily benefit the underwritten bankers to these transactions and which have certainly not created the broad-based economic participation that we had all hoped for.
Direct equity investment, not only loan funding, in business development will be the sole mandate of the ECSA.
The criteria for investment are obvious – growth of competitive businesses that create employment. The investment decisions would be left entirely to the members of the ECSA board which should comprise mainly experts, with proven track records in building valuable businesses.
ECSA will require its own budget and its own funding, in order to operate beyond political influence of the day and further, beyond such changes as there may be of or within the ruling party, from time to time.
I’m not sure what they’ll need, but it’s a lot. Let’s start off with 10% of total tax revenue, say — that’s about R100bn per annum, use it or lose it.
Invest that sum of money wisely, in broad-based future business development and, I promise you, after a decade there’ll be enough momentum and enough tax base to sustain net economic growth in the future, forever (and fill the holes of the past).
Imagine that?
DIRECT EQUITY INVESTMENT, NOT ONLY LOAN FUNDING, IN BUSINESS DEVELOPMENT WILL BE ITS SOLE MANDATE