Reviving SA will take bravery, not caution
We’re all champing at the bit to get back out there, but what will we find? We’re sitting tight, inside, huddled together without any idea of the true damage the storm will cause. The focus is on survival, literally, and we’ll worry about rebuilding later. Just let it stop raining. Just let us go outside.
The fatalities and economic devastation can be measured in numbers, real-time — but that’s not the real damage. What we don’t know yet is how we will have to change. What will the new income statement and balance-sheet ratios be for sustainable business? Will there be new metrics for valuation?
Yes, there will. The never-tobe-replaced six, 12, 18 months of turnover will have used up even the most prudent of reserves. There will be lots of “lessons learnt” and “never again”, and caution and hesitation and capital preservation.
We need quite the opposite. We need investment and energy and risk-taking in abundance, not wound-licking — we’re not going to sulk our way out of this mess. There will be deals to be done, bargains to be had — but you’ll need some courage to take money out of your pocket, and everyone will have to do it to make it work.
Debt will have grown to beyond manageable proportions, everywhere. A healthy chunk of debt will simply have to be converted to equity if we want there to be anything to lend to in the future. We can’t borrow ourselves out of this — debt isn’t the right capital instrument to fund permanent losses. There’ll be restructuring bargains, but everyone must play.
We’ve already seen some successes, expected and not. Those markets will eventually saturate, and the heavyweights propping up stock market indices will level off — there’s only so much data consumers can afford to use, only so much medicine worth taking. Central bank and government budgets and international finance reserves have been drawn down to encourage us, to keep us afloat. Those reserves have to be replenished.
It will now be the turn of the private sector to bail out the public sector. We may even need cross-sovereign debt setoff on a grand scale, or barter, to reorganise the ownership of the world’s resources. We can all print money, so that race for the drain will be found out soon enough and abandoned.
As for trade wars — it’ sa game for fools. If you want victory, become the lowest-cost producer.
There will be no quick fix. It’ll have to be a slow and steady grind back to solvency, liquidity and then sustainable profitability that can pay taxes — to fill up the coffers out of which the rescues were funded. Sustainability will count for more than maximising shortterm profits from your downsized business.
We’re going to need more customers for longer. Circulating money among the already rich (albeit less so for a while) doesn’t create value, it just moves it around.
An attitude of survival of the fittest won’t cut it. Forcing business underground won’t cut it. Regulations won’t cut it. Restrictions won’t cut it. We, the private sector, are going to have to release more capital into the economy.
Reckless gay abandon may even beat capital lockdown. We’re going to have to make SA the most attractive capital investment destination in the world. Yes, the world. We need to invite and embrace foreign direct investment as if our lives depended on it. They do!
GDP growth of 10% an annum (yes, we need 10%) doesn’t come out of a controlled economy. Make the playing fields level and honest, and that’s it, just stand back. Let everybody plant, and wait for your share of the harvest. Every time established business creates a job or, better still, funds an entrepreneur, the state has at least one soul less to worry about. We need to set free, not control. We need to encourage an economic frenzy.
Barnes, a former SA Post Office CEO, has had more than 30 years of experience in various capacities in the financial sector.