Dash of ooh la la would help

As the government and business gear up for the investment conference that President Cyril Ramaphosa has promised for later in 2018, it’s worth drawing contrasts with the investment conference his French counterpart hosted in January, when Emanuel Macron met 140 global CEOs in Versailles.

Ramaphosa wants to attract $100bn in new investment over the next five years to boost SA’s growth rate and create jobs. He is hoping to be able to announce concrete projects at the conference. He has tasked four high-level envoys to romance foreign and local investors in an effort to build confidence and elicit those billions in new projects.

His new administration has promised policy certainty and reforms that will boost SA’s sluggish growth rate. But though he has done much in a short time to turn around the governance of financially ailing state-owned enterprises and started rebuilding institutions that were wrecked by the Zuma administration, the programme of growth-boosting reforms he has promised remains at the concept stage. There is as yet little clarity on what the government is going to do to make the economy more attractive to investors and unlock investment, growth and jobs.

Contrast that with Macron’s concrete programme of reforms, in which the French president and his young team are delivering step by step on the programme he set out during his election campaign just over a year ago.

France was a slow-growth, low-jobs economy shunned by many investors because of its high taxes, rigid labour markets and heavy-handed bureaucracy. The Macron campaign made a new political offer to French people that sought to effect a longterm transformation of the economy that would address the growth deficit, employment deficit and public finance deficit. His approach, as one Élysée Palace official told South African journalists on a visit to France, “we say clearly what we are going to do, and we do it”.

Macron promised a more stable and predictable policy regime, and so the 2018 budget set out a programme of tax reforms and kicked this off with the first of the tax changes designed to cut the corporate tax rate from 33% to 25% over five years, as well as changing France’s wealth tax to a version more palatable to investors. He promised more labour market flexibility and has already implemented changes to labour legislation that will make it easier to hire and fire, as well as changes designed to decentralise bargaining between employers and trade unions and allow for more company-level negotiation, enabling companies to agree with their employees to bypass France’s controversial 37-hour week, for example.

He is determined to make France more competitive by making it an economy of knowledge and skills and has committed to spend heavily on vocational training and investing in human capital. Importantly, his administration has urged that France needs a cultural change in its DNA: it needs to value success more, but also to take failure as a way to learn. And it is sending strong signals to international investors to invest in France.

Brexit is a lucky break for Macron, in a sense: Paris is competing with Frankfurt and Milan for the banks and financial services companies seeking to relocate from London and is going all out to get those investors. It is working hard to change perceptions.

But though it is hardly more than a year into the Macron administration, investment is already starting to flow: the June EY attractiveness survey reported a 31% surge in new foreign direct investment projects into France, compared with just 10% for Europe as a whole. And at that Versailles conference, Macron was able to list major new greenfields investment projects by SAP, Disney, Mercedes and others.

Will Ramaphosa be able to do the same at SA’s investment conference? The euphoria of the first quarter has somewhat subsided in the second and as ratings agency Moody’s noted in a report last week, “tepid business confidence and subdued investment highlight the business community’s caution in anticipating effective change”. Ramaphosa knows that unless he can make SA more competitive and more attractive to investors, he cannot lift its growth rate or its ability to create jobs. But the list of reforms remains fairly vague, for the most part.

The lesson he could take from Macron is that to attract those investors, the promises need to be concrete and specific, and the implementation needs to be swift. Most unfortunately for Ramaphosa and indeed for SA, he doesn’t have the strong political and parliamentary support that Macron can rely on as he pursues controversial reforms. Addressing the political deficit may be Ramaphosa’s biggest economic policy challenge.

MACRON APPROACH … WE SAY CLEARLY WHAT WE ARE GOING TO DO, AND WE DO IT