SA falls off the investors’ map

LOSING FDI: INTERNATIONAL SURVEYS REVEAL REALITY OF HUGE DECLINE IN 10 YEARS

Investors take note of low growth, crime, graft, bad attitudes to business.

South Africa has dropped off the radar for investors – a dark reality that a few investment lions are not going to fix. International surveys show this sorry state, with three international surveys indicating SA dropped from the 28th country in the World Economic Forum global ranking to 61st in 2017. The IMD Global Ranking saw SA go from 37th to 53rd out of 63 countries. In ten years.

The World Bank Doing Business index has also seen SA drop from 28th place to 82nd place in a decade.

The massive jump to the left in 2007 by the ANC and the corruption right at the top of the country has destroyed investment to the tune of up to three or four million jobs. The surveys warned that investors took note of low growth, crime, corruption and bad attitudes to business.

Net foreign direct investment (FDI) stood at 24% of GDP in 2005. At the end of 2017, it was minus 31%. SA firms also had fixed investments of R3.3 trillion in other countries, while the world had fixed investments of R1.8 trillion in SA.

In today’s terms, we went from R1.2 trillion net positive FDI to negative R1.5 trillion – a loss of R2.7 trillion.

If one job created costs R1 million, SA lost 2.7 million jobs, although it’s not that simple as there are other factors, such as quality education and business confidence, that need to be in place.

Also, jobs can cost much more or less than R1 million, but the government has control over many things such as the quality of education, attitude towards business and fighting corruption.

The recent World Bank report also estimates that for every 1% reduction in the unemployment rate, the inequality measure, the Gini coefficient, would drop by 1.2 points. Three million jobs would have halved the unemployment rate from 27% to 13%.

The SA Gini would have dropped from 0.69 to 0.52 on these estimates, eliminating poverty and inequality. If these three million estimated jobs could have had a knockon impact of only 700 000 other jobs, then SA unemployment would be in single digits.

Cyril Ramaphosa: a good start but the real hard work is on the way

If South Africa just improved slightly, it would make a difference and certainly the improvement in business confidence, and consumer confidence are a good start.

But the real hard work has not yet begun. Spending tax money more wisely; jailing corrupt leaders; reducing the toxic racial atmosphere; easing regulations and closing state enterprises that require tax money year after year.

Lowering the cost of transport; communications; water and electricity while fixing roads, and infrastructure are minimum requirements.

The civil service wage bill needs to be cut by at least a third when expressed as a percentage of GDP. This must happen while the number of children to be educated drops to the world average of 24, from 32 now. The tax burden should be lowered and far more business-friendly policies should make the centrepiece of all laws.

Mike Schüssler is an economist at Economists.co.za