Cabi­net must ac­cept re­al­ity, or the econ­omy is in for a beat­ing

Eye

Weekend Argus (Saturday Edition) - - ISSUES - WIL­LIAM SAUN­DER­SON–MEYER Jaun­diced

IT IS un­usual to see a govern­ment that is, on the face of it, so en­trenched in power – a solid 62 per­cent of the na­tional vote af­ter two decades in of­fice, eight out of nine pro­vin­cial as­sem­blies – in such dis­ar­ray. Yet Pres­i­dent Ja­cob Zuma’s govern­ment limps from dis­as­ter to dis­as­ter, full of pub­lic bravado, but in­ef­fec­tual in ex­e­cu­tion and con­stantly wrong-footed.

Nowhere is the dis­con­nect more ob­vi­ous than in the ea­ger­ness to an­nounce new poli­cies which turn out to be dis­as­trous. Af­ter a pe­riod of blus­ter, deny­ing stark re­al­i­ties ob­vi­ous to ev­ery­one ex­cept the ide­o­log­i­cal di­nosaurs that cre­ated the poli­cies in the first place, the govern­ment reluc­tantly backs off. By then the dam­age has been done.

The oner­ous tourism reg­u­la­tions in­tro­duced by Home Af­fairs Min­is­ter Malusi Gi­gaba are a case in point. From the out­set, the tourism in­dus­try warned they would be hugely dam­ag­ing. Yet these pleas were ig­nored and the reg­u­la­tions im­ple­mented, cost­ing South Africa bil­lions in tourism rev­enue and an es­ti­mated 5 000 jobs be­fore they were scrapped more than a year later.

This week, Higher Ed­u­ca­tion and Train­ing Min­is­ter Blade Nz­i­mande gazetted a sur­prise pro­posal on the fu­ture of the 21 in­com­pe­tent and cor­rup­tion-rid­dled sec­tor ed­u­ca­tion and train­ing au­thor­i­ties – which will ef­fec­tively strip them of their op­er­a­tional role. It is a be­lated ac­knowl­edge­ment, a mere dozen or so years too late, that these bod­ies, charged with en­sur­ing a steady stream of skilled labour, have been a hope­less fail­ure.

De­spite more than R13 bil­lion in an­nual fund­ing to the au­thor­i­ties, re­search shows around 44 per­cent of the coun­try’s un­em­ployed can­not find a job be­cause they lack skills em­ploy­ers want.

Un­der Nz­i­mande’s out-of-the blue pro­posal, 40 per­cent of the money flow­ing to the au­thor­i­ties from the com­pul­sory pay­roll levy that larger busi­nesses pay, will now be di­verted to a Na­tional Skills Fund which will be cen­trally ad­min­is­tered. In other words, the min­istry’s end­lessly re­plen­ish­able piggy bank.

Al­ready au­thor­i­ties are be­ing stripped of R1.2bn from their bud­getary un­der­spend to help cover the costs of the govern­ment’s fool­ish prom­ise there would be no univer­sity fee in­creases next year. Once the skills fund is op­er­a­tional, the temp­ta­tion to con­tinue bail­ing out the univer­sity sec­tor in­stead of train­ing ap­pren­tices and in­dus­trial work­ers will be ir­re­sistible.

These prob­lems with tourism and train­ing have had dis­as­trous eco­nomic ef­fects. How­ever, they pale into in­signif­i­cance when one con­tem­plates the pain in store for the econ­omy if the govern­ment per­sists with the folly that is the Pro­tec­tion of In­vest­ment Bill, which was passed in the Na­tional As­sem­bly this week.

The bill, when en­acted, will re­place bi­lat­eral in­vest­ment treaties con­cluded with mainly Euro­pean coun­tries that are now ex­pir­ing and not be­ing re­newed. It re­moves for­eign in­vestors’ right of re­course to in­ter­na­tional ar­bi­tra­tion for the set­tle­ment of dis­putes and gives the govern­ment the room it says it needs for in­vest­ment reg­u­la­tion in the pub­lic good.

What Euro­pean and Amer­i­can in­vestors worry about, based on the govern­ment’s in­creas­ingly di­rigiste ten­den­cies, is a wan­ing com­mit­ment to pro­tect­ing prop­erty rights, the threat of ex­pro­pri­a­tion, and pres­sure to meet a vague and grow­ing de­mand for “trans­for­ma­tion”.

The chair­man of the EU Cham­ber of Com­merce in South Africa, Ste­fan Sakoschek, was un­usu­ally blunt in an in­ter­view last week. “New in­vest­ment de­ci­sions have been put on hold. And se­ri­ous dis­in­vest­ment de­ci­sions are next on the agenda.”

For­eign di­rect in­vest­ment in de­vel­op­ing economies grew by about 2 per­cent last year. Ex­cept for South Africa. Here, FDI dropped by 31 per­cent to $5.8bn (R82.6bn).

For now, Trade and In­dus­tries Min­is­ter Rob Davies is adamant the bill will ben­e­fit South Africa’s FDI flows. He is no less delu­sional than Gi­gaba and Nz­i­mande have proved to be. Ex­pect a U-turn down the road but only af­ter we’ve taken another eco­nomic drub­bing. Fol­low WSM on Twit­ter

@TheJaun­dicedEye

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