Have the courage to invest the cash
Private sector needs to release its trillions into the economy now
● The private sector must stop waiting for the government to create optimal conditions for it to invest the more than R4-trillion it is sitting on, says Elias Masilela, former CEO of the Public Investment Corporation (PIC), who heads the global impact investing initiative in SA.
It will wait forever and, meanwhile, the country will burn because of a lack of investment in developmental projects.
“The private sector needs to take more of a lead.”
It’s no good expecting the government to provide the right investment environment, he says.
This is what it should be doing, “but we know how long decisions take to be made in government. The country cannot afford for the private sector to wait for government if investment opportunities are availing themselves right now.”
It’s also no good for the private sector to keep asking where the developmental projects are for them to invest in.
“Where you have the level of economic and social imbalances we have in SA, the list of projects is endless. We have huge gaps in education, in health, in infrastructure, in telecommunications …
“It is the responsibility of the private sector to go out and say, where are the opportunities, where can we put our money, and what are the things we need from government for us to be able to do that?”
It is generally agreed that policy certainty and coherence are essential. Here, too, the private sector has a key role to play but has been far too passive, he says.
“For a long time the private sector has left policymaking only to government.
“It’s only now that they’re waking up to the fact that if you continue waiting for the government you’ll end up with a portfolio of policies that are not optimal for what you want to do.”
So the private sector needs to start getting intimately involved in policymaking, “influencing what government generates so as to paint their own picture or create their own environment within which they want to operate”.
The private sector needs to be much more proactive not only in investing, but in the framing of policy.
“Policy is too important to be left to government alone.”
Much of this should be happening at Nedlac, a tripartite body representing business, labour and the government that was set up in 1994 to originate, finalise and implement policy — which, says Masilela, has not been happening. “We need to make Nedlac a more functional organisation than it has been.”
For this to happen, it needs to be taken more seriously.
“Once it has made a decision, nobody should be able to walk away from that decision, as in the Nordic states where the Nedlac concept has worked very well.”
In SA, a decision made at Nedlac is often ignored a few months later by one of the parties to that decision.
“It’s a discipline we need to sort out,” says Masilela, a long-standing member of the National Planning Commission.
Co-ordination among business, labour and government stakeholders needs to be improved. A social compact is key to implementing plans, he says.
“Without a social compact the plan will be just another document sitting on a shelf not being implemented.”
Business often complains that the government resists more active private sector involvement.
“The president, finance minister and minister of public enterprises have all appealed to the private sector to help government to be part of the solution. We need to heed those calls and provide the support government needs.
“Government no longer has the fiscal ability to counteract economic cycles because of the weakness of the fiscus. We need a totally different engagement process. Cyclical fiscal policy is no longer feasible in SA.”
The concept of impact investing in order to generate a social and environmental impact rather than only to swell the bottom line is a response to the UN’s sustainability development goals aimed at saving countries such as SA from disaster.
“The South African private sector needs to understand they should not invest for narrow profit only but for broader economic gain,” says Masilela.
“Whatever they do has to have a broader impact than just influencing the bottom line. And the investments have to be visible so that the poor understand that they’re not just being made to benefit the owners of capital, but to benefit them as well.”
He says there’s a lack of understanding among South African owners of private capital about what investing in developmental projects means.
In the pension fund space, boards of trustees are not sufficiently equipped to anticipate and manage the risks of investing in such projects, and so they don’t.
“The opportunities are there. “It’s about bringing the suppliers of capital and demanders of capital around the same table.”
The South African impact investing initiative he leads is trying to bring the private sector and the government together at the presidential investment summit in November.
While private sector investment in developmental projects is key, so, too, is the role of state-owned enterprises (SOEs) in the implementation of those projects, he says.
SOEs need to provide the infrastructural environment for things to happen.
“But instead of contributing to the economy they’re deducting from the economy.
“So we can’t leave this to the SOEs alone. The private sector needs to have an input into how you improve the contribution of SOEs to the economy.”
The government has been trying to improve the quality of SOE boards, but it has become evident to him through his work on the National Planning Commission that “more and more of the good people” see involvement with SOEs as a reputational risk.
“So the area where the minister needs to get those resources from is shrinking quite quickly.”
Does the government have to step back and allow the good people to do what they need to do without being overruled?
“There’s no doubt the situation has to change,” he says.
Successful economies practise a revolving-door principle between the private and public sectors, but it only works where “good quality people do the revolving”.
“Government needs to respect the professionals, and professionals need to stand their ground against government interference.”
The opportunities are there. It’s about bringing the suppliers of capital and demanders of capital around the same table