Joel Netshitenzhe
Article: Letter from Tshwane
25 August 2000
The great domestic investment debate
At each other’s throats once again, but this time
for good reason.
That is the sentiment here in Tshwane regarding the
current debate on domestic investment. Typical
of South Africans, as much blame is apportioned
as exciting proposals are proffered.
It is to be welcomed that, more intensely than ever
before, matters of the real economy are being
subjected to serious reflection. Ideological foes
are finding common ground as readily as standard
refrains are jettisoned. There is perceptible
impatience at treading wearily along the narrow
paths of abnormal normalcy.
Even more critical is the premise from which most of
the contributors proceed:
- The decisive element to rapid growth and larger foreign
investments is massive investment by South
Africans in their own economy.
- While there has been improvement since 1994, domestic
investment is woefully inadequate.
- Bold thinking and decisive action are required.
Xolela
Mangcu and Sean Flynn call for tax-free personal
savings to fund start-up and other investment1.The National Institute for Economic Policy identifies deficiency
in Aggregate Demand as the main problem, and it
calls for demand stimulation such as greater government
investment expenditure and a comprehensive social
wage2.
President
Thabo Mbeki says consideration should be given
to a Reconstruction Bond and new incentives. SACOB
is re-examining its Business Confidence Index,
and it laments racial polarisation in our society3. The Financial Mail calls for life-long
education4.
Why
all these bold ideas now? Perhaps those philosophers
are right who assert that a collective consciousness
has the capacity to sense a critical historical
moment. This is when important factors converge
to force decisive movement forward.
In this
instance, there is a realisation that, given the
macroeconomic efforts made by government, the
call for investor-friendly policies is starting
to sound hollow. Pointing fingers at business
doesn’t help either, for all the players,
including government and parastatals, are to blame
for low levels of investment. In 1995 prices,
aggregate real investments hover around the R100-billion
level – the same as in the early 1980s: a
decline from over 25% to about 17%, as a share
of GDP.
But
to find bold answers requires that the root causes
of the malaise are dispassionately examined.
Questioned
on major investment constraints, most business-people
cite crime and social problems, high interest
rates, uncertainty over government economic policy
and labour regulations. Go to the brass tacks
about their firms’ actual operations, however,
and crime and government economic policy rank
as moderate rather than critical influences5.
On the
other hand, the outlook within black business
is much more positive, and the main constraints
are around access to finance.
This
is South Africa: a prime example of the gulf between
reality and perceptions. “It’s almost
as though the collective South African consciousness
has slumped into a depression”, says Alec
Hogg. “No matter how much of it may be around,
good news is treated as an aberration”6. Some even search
the nooks and crannies, and, abracadabra, it’s
Mbeki’s recent statements on racism, HIV/AIDS
and Zimbabwe, which are responsible for a trend
that is almost a decade old!
So,
where to now? First, we should disabuse ourselves
of the attitude that you can only be right if
you prove someone else wrong. Often, good economic
proposals are sullied by a new-found ritual: attack
government and ridicule GEAR – without a
reflection on where the country would have been
without this policy in the current global terrain
– and you are the paragon of profundity.
Cast
aside these indiscretions, and it is clear that
the challenge of the moment has been grasped far
and wide.
What
is required is plodding industry to harness each
reasonable proposal into a practical programme.
Nedlac, the Millennium Council, the Presidential
Working Groups and other fora should give the
lead. Issues that will require serious attention
include institutional capacity, to ensure speedier
utilisation of resources available, such as funds
for poverty relief, the Umsobomvu Fund and the
portion from the public sector pension fund earmarked
for infrastructure and other investment.
It may
be that decisive movement forward will require
bold action on one or two issues that may help
impel other indicators to new heights. Should
this be the RDP bond or a form of prescribed assets?
Should it be massive injection of funds to empower
black and small business? Should it be better
communication between government and business,
or a combination of all these and more?
Or should
it be a halt to all social change or at least
a Government of National Unity with the Democratic
Alliance?
With
the latter, if Tshwane is straining your leg by
pulling too hard, the aim is to illustrate that
there are limits to satisfying narrow and misguided
preferences!
Joel Netshitenzhe
CEO, Government Communications (GCIS)
Published in Independent Newspapers
1
Xolela Mangcu and Sean Flynn, A savings model
for economic growth: The Sunday Independent, 20
August 2000
2 Asghar Adelzadeh, Loosening the breaks on economic growth:
Ngqo! (Economic Bulletin published by NIEP), Vol.1,
No. 2, February 2000
3 Kevin Wakeford (SACOB CEO), Economic Indicators may only
scratch the surface: Business Review, 16 August
2000
4 New Deal: Financial Mail, 12 May 2000
5 Stephen Gelb, Fixed Investment in South Africa: A Preliminary
Report for the Presidency (NB: This is still being
finalised)
6 Alec Hogg, Boardroom Talk: Business Review, 13 August 2000
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