The good ship SA will set sail again

Re­pair work on econ­omy af­ter years of ne­glect is bear­ing fruit

Sunday Times - - Business Opinion - By JABU MABUZA

Economists and political an­a­lysts have writ­ten and de­bated much about the cur­rent land­scape. Much time is be­ing spent un­pack­ing how we got here. Some have even ven­tured into de­tailed anal­y­sis of what the fu­ture looks like. Much has also been de­bated on var­i­ous plat­forms about what needs to be done in terms of key eco­nomic re­forms, and busi­ness lead­ers have been a big part of these in one shape or form.

I don’t think it serves much purpose for me to re­state any of the views about where we are and what we need to do to get to where we want to get to, save to maybe em­pha­sise the fol­low­ing:

● SA is one very small part of a global eco­nomic sys­tem that does not stop while we try to get our house in or­der.

● We compete against other na­tions for in­vest­ment cap­i­tal and mar­ket share, and in the real world those na­tions that want to suc­ceed most and are pre­pared to do what­ever it takes to at­tract cap­i­tal and in­vest­ment will win.

● To at­tract in­vest­ment, you need con­fi­dence. This is a chal­lenge for all of us. As South African busi­ness we need to lead the way in af­firm­ing our con­fi­dence in the econ­omy by in­vest­ing in it.

● Busi­ness is part of the so­lu­tion and we need do ev­ery­thing in our power to re­build trust and con­fi­dence as a pref­ace to driv­ing the struc­tural eco­nomic re­form needed to achieve sus­tain­able and in­clu­sive eco­nomic growth.

These are all nar­ra­tives you have heard, so I won’t spend much time on that.

I want to share my thoughts on a dif­fer­ent way to look at and think about our cur­rent land­scape and trajectory with the hope that this think­ing will give you a dif­fer­ent con­text for our chal­lenges, a con­text that will be at the back of your mind as you think about the road ahead and your con­tri­bu­tion to it.

I want to use the anal­ogy of SA as a ship from the 2008 fi­nan­cial cri­sis to date. In late 2007, head­ing into 2008, SA found it­self sail­ing out at sea on a ship that was in very good shape — we had rel­a­tively low debt-to GDP ra­tios, the bud­get deficit was con­tained and the pru­dent man­age­ment of the econ­omy over the pre­vi­ous years by then fi­nance minister Trevor Manuel, Pravin Gord­han at the South African Rev­enue Ser­vice and Tito Mboweni at the Re­serve Bank placed us in a ves­sel that could with­stand some rough seas.

The storm hits

And there­fore when the storm hit in the form of the global fi­nan­cial cri­sis, later to be­come known as the Great Re­ces­sion, SA man­aged to get back into the har­bour with a ship that was cer­tainly dam­aged and in need of re­pairs but that had weath­ered the ini­tial storm far bet­ter than many other na­tions — our banks and fi­nan­cial ser­vices sec­tor did not re­quire state bailouts as we saw in the large West­ern economies, our ship did not sink as we saw with Ice­land and al­most with Ire­land and later with Greece.

We did not re­quire quan­ti­ta­tive eas­ing from the Re­serve Bank, and Gord­han, the new fi­nance minister, had scope to cor­rectly start in­creas­ing the deficits in an at­tempt to smooth over the im­pact of the Great Re­ces­sion.

Up until this stage we can­not blame

Ja­cob Zuma for the dam­age to the ship. There is a nar­ra­tive that all was go­ing smoothly until Zuma stepped into of­fice and from that point on­wards his ac­tions re­sulted in the im­plo­sion of the econ­omy.

We have to ap­pre­ci­ate that the global fi­nan­cial cri­sis struck the ini­tial blow and it was se­vere. How­ever, as the years of his ad­min­is­tra­tion went on, and in par­tic­u­lar his sec­ond term in of­fice, our ship was left in the har­bour dam­aged with no-one work­ing on re­pair­ing the holes and the dam­age to the ves­sel from the fi­nan­cial cri­sis.

In­vestors, busi­ness and the pub­lic, hav­ing no­ticed very lit­tle go­ing on in the har­bour, started to ques­tion what was hap­pen­ing, and thanks to some ex­cel­lent jour­nal­ism news started to leak on what we now re­fer to as state cap­ture.

Busi­ness em­barked on an in­vest­ment strike, for­eign in­vestors ran scared and con­sumers lost con­fi­dence, all at a time when the global econ­omy en­tered a syn­chro­nised global re­cov­ery and other na­tions that had been re­pair­ing their ships were able to head out to sea again into calm wa­ters and be­gin the process of pay­ing down debt and grow­ing their economies.

SA found it­self in the com­pany of Venezuela as the only coun­tries in the G50 that were not grow­ing. The fi­nal years and months of the Zuma years are well known, and for­tu­nately De­cem­ber 2017 marked the turn­ing point in what was look­ing like a path to a failed state.

When Pres­i­dent Cyril Ramaphosa as­sumed the cap­taincy of the ship and gath­ered to­gether a team of the best men and women he could find in the coun­try to re­pair our ship, they headed down to the har­bour and en­tered the ves­sel. To their hor­ror, not only was the ship from the out­side still dam­aged from the storm, but worse, the en­tire en­gine room had been gut­ted and ev­ery floor­board and cop­per wire had been stripped and stolen.

Re­build­ing the en­gine room

Thus be­gan the ar­du­ous process to re­build the en­gine room. Members of the pub­lic who passed the har­bour daily could not see any­thing hap­pen­ing: no-one was paint­ing the out­side of the ship or plug­ging the holes. A false dawn was de­clared.

As the Ramaphosa team worked day and night in­side the en­gine room, a storm erupted (emerg­ing mar­kets, Tur­key and Ar­gentina) and as they were try­ing to make re­pairs the wa­ter started com­ing through the holes that had been left un­re­paired for years.

The members of that team con­tinue work­ing as hard as pos­si­ble to try get the ship ready to head out to sea again. It is not go­ing to be an easy task and nor are we cer­tain that by the time the ship is ready to set sail again the seas will be con­ducive to sail­ing.

But we have to as a na­tion put our heads down, work as quickly as we can be­fore the global eco­nomic cy­cle turns again and re­ces­sion­ary times re­turn to the world’s economies.

Sim­ply put, there are no magic tricks — all reme­dies take time. How­ever, progress is be­ing made and the re­cent in­vest­ment com­mit­ments at the pres­i­dent’s in­vest­ment sum­mit are an­other affirmation that there is a re­newed ap­petite for South African in­vest­ment op­por­tu­ni­ties.

This is an edited ex­tract from a speech Mabuza de­liv­ered at the end of Novem­ber in Steen­berg, Cape Town. Mabuza is chair­man of Eskom

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