Idle offshore capital must be put to work
It is trite to observe that capital projects are a necessary foundation for a prosperous future. The more precarious the state of a country, the more likely and urgent the need is to embrace investment. Instead of spending our time bemoaning which investments we can’t afford to make, we’d better consider those investments we can’t afford not to make.
At the bottom of the pit of no investment you’ll find the disgraceful closure of Nomini Primary School, where maggots were found crawling out of toilet bowls and raw sewage flowed through kitchens and classrooms. We hang our collective heads in shame. At last that has been fixed.
At the other end of the spectrum we find the ambitious stadiums built for the 2010
Soccer World Cup, or the Gautrain. Forget the money, it’s the contrast of despair and hope that cannot be ignored. There is no good time not to invest. Our current circumstances just require different thinking.
The state must be an enabler, but it doesn’t have to be the funder or sole owner. Attractive capital projects will not require Treasury guarantees, burdens as they can be with their beyond-money obligations.
Social development and commercial sustainability aren’t the same mandate. Don’t mix them lest the popular promises overwhelm the commercial imperatives. Public service mandates should be funded by state capital; commercial projects not. Are there sensible, commercially fundable, capital projects in SA? Hell yes!
The list is long — road to rail; clean and secure water supply; alternative energy; technology as inequality bridge; education, education, education; health care, health care, health care; marine oil and gas exploration. These aren’t just needs and challenges, but opportunities, they’re game changers. The positive knock-on effects will spread faster than any virus — both immediately as we invest in jobs, and later as we harvest the fruits of our labour.
Idle offshore capital, earning risk-free negative yields, can’t wait to pour into high-yield projects. The debt funding will come. A healthy portion of equity will also be required. That will come too, but only under certain conditions. Stability and predictability, or their absence, have a huge effect on the cost of capital. Guessing the forward rand-dollar exchange rate, or predicting the oil price, won’t get the money, but ensuring that the future cost of jet fuel is bound within an acceptable range (achievable through forward cover and hedging strategies) will.
There are other rules. Government policy certainty is not negotiable. Taking money out of balanced economic equations is not allowed. Consumers must pay for services. All this is obvious; not making it happen is stupid.
Africa, from an infrastructure perspective, needs to start thinking as a common-cause continent, not a collection of disparate sovereign states. We simply don’t have the economies of scale separately, but the sum of our parts makes us a global player.
We have abundant natural resources and the fastestgrowing population in the world, just for starters. Imagine a co-sovereign-owned, huge airport hub in the middle of Africa as a North-South-EastWest fulcrum that could rival Dubai (they started with a desert) or Istanbul. Imagine a pan-African, export focused, e-commerce capability that could rival Amazon in the West and Alibaba in the East?
We are, after all, in the middle of the world.
It requires courage, purpose and confidence to get something started, but then at some point the success becomes a habit and you can’t stop the momentum. Do something, anything. Clean water and functional toilets would be a good enough start. A positive attitude will be our first investment dividend, founded on the prospect of personal economic prosperity.
After that nothing will stop us! We need to get into a better mood. There are hundreds of South Africans who can lead this. Let’s go get that idle international capital and put it to work in our own backyard. No buts, no maybes.
Barnes, a former SA Post Office CEO, has had more than 30 years of experience in various capacities in the financial sector.