South Africa’s development reality is that both South Africa’s poorest and the government itself are dependent on the investment of corporate cash for the country to see growth.
VENTURES AFRICA – To be, or not to be – Prudent! Crossing the road completely engrossed on an emergency call on your mobile has just as great a chance to make you an emergency. What is so amazing is that some of the people I know who are most health conscious frequent the chemist the most.
It’s like continually taking vitamins but never building your physical strength and immune system through exercising and proper dieting.
The same applies to South Africa’s economy. For a few years now the South African government has promised not only constituencies, but big businesses, the emerging middle-class and the poor, that there is some rainbow in sight.
Conformist wisdom will preach that the country has a strong democracy but this is being penetrated more and more by the unquenchable thirst for power. Just recently there were chilling insinuations in the media that the president and deputy president have to be protected. From what and who may we ask?
It is easy to have a different view of when within the ruling party the ANC has two distinctive passions; 1) playing to the left and 2) a penchant for the right. It’s a pendulum and just possibly there’s an illusion that a pendulum swings forever. Each time it is restarted, the intensity and duration of swing varies.
Aggressive promises of mine nationalisation, attacks on the judiciary and the un-kept promise of job creation leave a query of inept governance on certain areas. Many of such areas form the foundation of economic stability. Truth exists in all areas of comment and media publications. The IMF has dropped South Africa’s growth outlook, Moody’s downgraded all “Big Four” of the country’s banks and the country has slipped on the ‘ease of doing business index’.
So accusing the countries hands that control the cash may be somewhat of a treacherous move. Last year South African business ‘sat’ on R578bn in cash. This stash seems to have grown.
Casualty sectors will be mining BHP Billiton set to “demerge” most of its local mines into a separate company. Manufacturing takes a further knock as Furniture giant Steinhoff International got the go-ahead from the Reserve Bank to shift its primary listing to Frankfurt, the first major move abroad since Anglo American, Old Mutual and SABMiller 15 years ago.
Let’s follow process and ask what has happened to all the investment into the country? The UK has also indicated that aid will be withdrawn in 2015. Taking it a step further, the monotone of threats and attitude don’t coincide with the return on effort by government. Setting policy on contrast to a democratic society, threatening undertones on which way the wind blows tends to cause a clutch of the purse.
To add credence to reason, the uncovering of R34.9 billion in irregular spending of which R1.1 billion was only due to fraud and corruption. To add context, this is within one Ministry – the department of Public Works – this over 13 year period.
So is South Africa Inc still a good portfolio to invest in? The JSE seems to be on the path of dilution. More importantly can the current CEO and Board turn the performance around? Performance to date seems to be taken into consideration before waiting to hear if or when a turnaround will be instituted.
SA companies only hold approximately 18% of GDP. What areas are investable? Infrastructure cannot be the only areas on the cards. Public Works’ performance has significantly startled off investors and so has adulterated Nkandla saga still ringing in the ears of South African media. This bears trust issues. The sooner this fact is accepted and that the bearers of cash actually call the shots the easier they may be a sign if the horse may get a jockey fit enough to win the race.
Considering the manufacturing sector over the past six years has shrunk from 16.4% of the economy to 11.1% and for the same period “general government services” have amplified from 12.4% of GDP to 17.2%. Yet actual services and performance even to the extent of filling government positions have been exceptionally casual. Can the ANC turn in around – of course they can. Are they willing to make the hard choice to do so in favour of an investable environment – remains to be seen!
When countries drop in rankings it is rarely due to a lack of appetite for the country, but due to governance and market maintenance conditions.
Power to Control or Power to Grow
In summary, hoarding cash is an indicator that the government has to start pulling certain levers into shape in order to remedy the lack of sentiment. Can business be trying to force the hand of the ANC? There is no middle ground as the ANC is split into left and right camps. This only weakens their decision making ability but strengthens the hand of business that have illimitable opportunity not only in emerging markets on the continent but also abroad. Many economies are readying their environments to attract competitive investments.
The once formidable economic powerhouse of the continent has been dethroned and yet nothing in the form of favourable policy has been altered to address reversing this position back to number one.
There is a campaign to create 6 million jobs. Maybe business should have been met first. The wrong people are being assured of something that is not even within the control of government.
Playing chess with yourself leaves you with two options – you can win yourself or lose to yourself. In both instances – you’re still alone in the same circumstances.
