SA needs stronger state-business links

WHEN I was growing up in eMalahleni (previously Witbank — in case you’re reading this, Mom) governments were just governments and they, rightly or wrongly, busied themselves strictly with the affairs of the state or the province or the municipality. By and large they were a boring, nondescript group of upright citizens who served the community. They looked after the roads, built the hospitals and schools, managed the waterworks and the sewage farms, stuff like that.

For the most part, government officials were either invisible completely or grey enough to get lost against the sky line on a cloudy day. They were grumpy old men who did their jobs damn well but were otherwise a little strict and a bit scary if you wanted to play “kleilat” next to the reservoir. Highly respected, they looked like headmasters and stayed out of business, never made much more than a basic respectable living, worked for the government for 40 years — civil servants who we never saw much of, perhaps because there was no television.

The government certainly seemed to have less to do with business then than it does now. In those days, my impression was limited to thinking that the finance ministry managed the government budget — essentially collecting taxes and spending those in strict adherence to a plan agreed and published annually. The Reserve Bank looked after interest rates and the currency — that was about it. Things have certainly changed. Only last week the (socialist, nogal) French government gave the nod to General Electric (from the US) bid $16.9bn for the energy and engineering business of Alstom, ahead of the bids of German company Siemens and Japan’s Mitsubishi. And that was that — commercial considerations set aside, trumped by government preference.

France then went one step further and took a direct 20% stake in Alstom. Such government interventions are commonplace nowadays, whether you like it or not, or whether it’s a good thing or not. Governments, particularly in the leading international economies of the first world, are now the play makers and gatekeepers in corporate activity — not just as regulators but as investors, directly or indirectly.

Governments are now pervasive in business, worldwide.

The US, in so many ways, has set the precedent. Ever since the Lehman bail-out in 2008, the Federal Reserve, as the instrument of government policy, has been the most influential determinant of economic direction in the US, if not the world.

I think it has got out of hand. The markets wait with baited breath and hang on every word of every speech of Janet Yellen, chairwoman of the Federal Reserve, as they did her predecessor. The S&P index flails about like a garden hosepipe as traders

Governments… are now the play makers and gatekeepers in corporate activity — not just as regulators but as investors, directly or indirectly

take pre-emptive positions on her expected pronouncements. She determines the level of US Treasuries purchases and money printing and interest rates, which in turn determine the cost of money and the exchange rate of the dollar.

But bureaucrats go even further than that — buying shares in General Motors and AIG and whichever companies they deem fit — exercising a right, which they got from goodness knows where, to determine who lives and dies in corporate America. On the same day as unassisted Detroit filed for bankruptcy, assisted Mor- gan Stanley declared profits 66% up — who made that choice?

This is no longer free enterprise, this is government control — they have crossed the line.

Of course, the rest of the world isn’t going to stand by and watch. The plot of the US is simple — depreciate the currency of its $17,517,997,906,292 (as I type this) outstanding debt so that it can repay it in cheap money. Well, two can play that game. And so it is that the Bank of Japan, the European Central Bank, the Bank of England and others joined in the fray — in a race to the drain to see who could make their currency weakest so that their exports could flourish. It’s an even bet who’s going to win — but the more pro-austere governments like Germany and England have my money. Real economies will trump financial economies eventually. In the meantime, beware the asset bubbles brewing in the bubble bath of easy monetary policy.

If it’s not financial market intervention then it is restrictions on the supply of oil, or the mining of platinum or the legalising of dope or the banning of Google — whatever. Don’t kid yourselves, private sector, you’re playing with the scraps.

Across borders, government actions and interventions determine the cost or yield of capital, exchange rates and the rules of entry and exit. Internally, governments also exercise an increasing influence over who does which deals with whom.

What qualifies them to do all of this, beyond the popular vote? At the very least, there should be some rules and partnerships.

First and foremost, do the core things right. Justice for all, education for all, primary healthcare for all, working infrastructure for all, running water for all, look after the wretched and disabled — you know, the basics — that is what we pay taxes for. Apply this fairly and without prejudice and favour and without corruption and you’ve got our vote to serve again and again.

On the economic front, if you’re going to get involved, protect us from all enemies local and foreign, don’t allow the crooks in, fight subsidies with subsidies, fight dumping with tariffs and deliver unto your local team a level playing field. Further, don’t sell our country to foreigners, export our goods and services, and don’t cut any deals that mess with our natural resources, ever.

Make us the destination of choice for long-term investment capital. That means that the money must find it easy to come in (and build things here that will stay and employ our people) and don’t block fair returns on their way out. Eliminate exchange controls (they are so fifties), match first world trading partner business practices and regulatory frameworks and rules of play. Enable local business start-ups.

Don’t mix politics and business. Don’t allow political overrides to cloud economic sense.

We, business and government, are forced to be partners and we need to be friends in order to thrive locally and compete internationally.

I think in the rest of the world they’ve gone too far. In SAwe haven’t gone far enough.