No, it will not be all fine in the end

There are two sorts of people who read my research or listen to my presentations. The first can disagree with an argument or a forecast but still come back for more, wanting to engage and debate.

The other group, however, throws up walls. They will react negatively to any depressed outlook or scepticism. They are unable to engage when asked why they are being so negative and cannot see the difference between an unrealistic negative forecast and a realistic, constructive negative forecast. They will then retreat to (insert colloquialism) or a sales pitch.

Some people just don’t want to hear bad news and react instinctively against it. I was lucky recently when I had the opportunity to address a major firm’s annual general meeting. They took the depressing news pretty well, even though it made their lives a little more difficult. They recognised their clients appreciated the honesty.

This splitting of people is exceptionally important in the current context for business — and, indeed, right now — more so as many firms are starting their 2020 planning cycles.

Both these types of behaviour have been exhibited in 2019. Before the elections, a majority of businesses were in the latter camp in public and couldn’t process a more nuanced outlook on the government (in private, there was less of a majority, an interesting issue in itself).

After the election, the needle has swung in the opposite direction and people are willing to accept a realistic negative outlook, or at the very least engage rationally with it. This shift is why sentiment is ground down and speaks to the slow pace of recovery to come. Yet the alternative is not somehow possible if conjured by magic. Hence Ramaphoria collapsed so definitively soon after May.

Even those who maybe see some recovery or have a different line of reasoning on the current situation can still appreciate the strong and increasing reform pressure now being applied by business onto the government.

Those who throw up walls, however, undermine the necessary pressure for political foundations to shift the reform machine. They put up a range of arguments that simply don’t cut it. The standard line is “it will all be fine in the end”.

This ignores two things. First, even if “bad reforms” don’t happen in the end (say, expropriation without compensation or National Health Insurance in its most extreme form), the damage you can create in the interim (what we call fallout risk) can be so severe as to prevent a recovery.

Second, things will only be “all fine in the end” if business people actually stand up and do something. There is no mystery other force that can substitute. This is true for SA’s obsession with social compacting. Within this political economy context, business has to wholeheartedly stand up for what it wants and cannot precompromise. The fudged mindset over this means the ANC believes business will always “roll over”.

Integrated resource planning is the latest example of the absurdity of social compacting. The behaviour of labour in objecting and holding up an entire process that was never a legal requirement in the first place, without a constructive alternative that was costed and thought through, should be the final nail in the coffin. Nedlac should be abolished.

The question for business (and ultimately the president and ANC too) is what happens if ultimately balance is impossible and the time wasted leads to worse outcomes? Maybe there are things (such as Eskom or lower cost of doing business) that cannot be compacted. Coming to this view will deeply affect how you deal with compacting in the short run.

I apply this to Eskom in two ways. First, there simply isn’t time to be faffing, and something needs to be done right now (by the midterm budget speech). Second, jobs-and investment maximising outcomes do exist through a Just Energy Transition, and so leadership should be applied to tell labour to back off as the real interests of their members are being accounted for in policy. This is how to cut through compacting.

Business thinking about the year ahead should be cognisant of a dead end on compacting being unavoidable. Global loose monetary policy, comfortable elites, “normalised” inequality, poor equity market returns driving money into government bond auctions, weak growth keeping the Eskom system just on the right side of loadshedding all puts the presidency in far too comfortable (and patient) a place.

This is not to say some people in power don’t “get it” .I think there is a subset of ministers who actually does understand that the country is fundamentally in the wrong place. The problem is that the system itself hasn’t flipped, given the lack of political capital deployment to take the tough decisions.

One person who does get it is justice and correctional services minister Ronald Lamola. Speaking at a Kgalema Motlanthe Foundation lecture last week, he stated very plainly that there is no time to spare and that government just needs “to act … what is implementable must be implemented”.

Exactly. Jump.