“We appear continuously to score own goals”
Andrew Dittberner Chief investment officer at Cannon Asset Managers
1 What are the top three policy issues that are depressing SA’s growth rate?
Labour unions are dictating government’s labour policy, which is increasingly business unfriendly. The net result is a loss of jobs and reduced profitability, having material downstream effects. This leads directly to the second policy that holds South Africa back, and that is BEE policy. After 20 years of democracy, SA should be further down the transformation road. However, proper thought has not been applied in terms of how transformation should be undertaken and this has materially impacted on the country’s ability to grow. Finally, whether it is a policy issue or not, the lack of competition that Eskom faces allows it to hold SA hostage to its inability to provide the necessary power.
2 What are the positives? Can we strengthen and improve on these?
One of the country’s key positives is our geographic location. SA belongs to one of the fastest-growing regions in the world, yet we appear continuously to score own goals. Removing unnecessary policies such as the recent visa restrictions, which prevent South Africa from doing business in the region, can only be beneficial.
SA is the home, or birthplace, of some of the world’s largest and most recognised businesses. SABMiller (recently the target of a takeover bid), Naspers*, Anglo American and BHP Billiton, to name a few, give one insight into the intellectual capacity of the country, along with the sound corporate governance principles that we follow and the opportunities and potential that exist.
The burgeoning middle class is another positive. It is this growing middle class that is going to carry our democratic society forward. Over the past 20 years at least 3m South Africans have joined this middle class. This number continues to grow today.
3 What can we do in the short term to boost growth?
A number of short-term solutions are readily available. First, the roll-out of the much-talkedabout infrastructure spend. Many infrastructure projects can start reasonably quickly, while being funded out of current budgets, and have material spill-over effects. While the infrastructure spend will create jobs immediately, once completed the infrastructure remains, improving South Africa’s global competitiveness.
Another quick fix would involve selling off underperforming state-owned enterprises such as SAA and Eskom. This would free up muchneeded capital that could be directed elsewhere. Finally, improving the relationship and cooperation between the private and public sector will materially improve business and investor confidence.
4 SA has slid a further four places to 73 out of 189 countries in the World Bank’s latest Doing
Business report. Do you agree that SA is slipping, and if so, how would you fix it?
I cannot argue with the World Bank’s findings. The ease of doing business can, and should, be improved quickly and dramatically. Legislation and bureaucracy make doing business in SA incredibly tiresome. Removing this red tape and putting legislation in place that supports small businesses would go a long way to improving employment. Small businesses create jobs. Mauritius is a great example of what can be done to improve the ease of doing business and, as a result, it is unsurprising that many now view Mauritius as the gateway to Africa. SA needs to catch up.
5 What would your strategy be to address the need for transformation and empowerment, while ensuring an attractive business environment for investors?
Historically, black empowerment transactions have been undertaken in an upside-down manner. Instead of distributing a portion of one’s business to a select few individuals and appointing black board members at the executive level, if we had started at the other end of the spectrum 20 years ago, we would find ourselves in a materially different situation today. While I am 100% behind transformation, it should be undertaken in a more coherent manner. Empowerment should be about redistributing wealth to the masses, as opposed to a select few. To do this, the money used on BEE transactions could be better spent at the grassroots level. It is about improving our soft infrastructure, which includes education and health. This will ultimately result in transformation, as the natural progression takes place at an advanced pace.
*finweek is a publication of Media24, which is a subsidiary of Naspers.