SA falls off the in­vestors’ map

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

The Citizen (Gauteng) - - BUSINESS - Mike Schüssler

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

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