Just a few months ago on his visit to London to attend the Financial Times’ Africa Summit, President Cyril Ramaphosa will have felt the chill of a city moving through its autumn towards winter – for many, a trying time of the year.

It was a trying time for the President too, as he tried to sell South Africa as an attractive destination for investment and trade. The reception this message received may have been a little colder than the weather.

As the year draws to a close, it is worth revisiting this important event for the light it sheds on where we stand as a country.

For many in South Africa and abroad who welcomed President Ramaphosa’s ascendency, the assumption was that he would embark on reform – in the administration of the state and in the operation of the economy – that would get South Africa back on track. And this is not controversial, since even the president has said as much. In July this year, he remarked that ‘we will need to make tough choices on everything from labour legislation and SOEs to policies on the NHI, the national minimum wage and the Reserve Bank’.

In fact, this message featured in President Ramaphosa’s address to the summit. ‘South Africa,’ he said, ‘is positioning itself as an investment destination of choice. At the core of these efforts are good governance, growth enhancing reforms and macro-economic stability.’

He went on to note that government was ‘taking steps to provide greater policy certainty’. It would be rolling out plans in the energy and telecommunications fields. There would be changes to the country’s crippling visa regime. A ‘process of accelerated land reform guided by the recommendations of an expert panel’ was now under way. And a suite of policies were being developed for potential growth areas from agriculture to textiles to the oceans economy and the high-tech sector. All very upbeat.

But it seems that this message got caught in the headwinds of South Africa’s realities. In a question-and-answer session with Financial Times editor Lionel Barber, President Ramaphosa reiterated what he had said previously. There was an admission of the damage that had been done to the country (‘worse than you think’ – though, for some reason, journalists seem averse to probing why he failed to raise the alarm as he occupied the number 2 slot in government.) Things were moving along, institutions were being ‘strengthened’ and the country was ‘making progress’ on reform.

In a subsequent interview with the influential current affairs magazine The Economist, this line of thought continued. There was an acknowledgement of the scale of the country’s problems, a recognition of the need for action and then equivocation – what might once have been called the ‘Long Game’. He supported finance minister Tito Mboweni’s strategic plan, but was cautious about implementation. ‘This sounds like classic Ramaphosism,’ the journal remarked, ‘reform, but only up to a point, and after much consultation. He endorses all of Mr Mboweni’s tough ideas, but with a crucial qualification: “Of course you can’t implement them all in one go.” So how determined is he really? Does he have a sense of urgency – and is he willing to pursue reforms where there will be losers as well as winners?’

Unspecific and promissory. And as it happens, the ruling African National Congress has rejected much of what Mr Mboweni has proposed. If there was a need for tough choices, on these platforms there wasn’t a great deal to indicate they were being made.

 Sadly, this represents just one side of the malaise: the things that are admitted by government to plague South Africa. But the country’s success hinges as much on dealing with the challenges not even forthrightly acknowledged as such.

The most obvious example here is the attack on property rights. Although typically couched in the language of land reform, this has more to do with expanding the state’s powers over the assets of its subjects. This is abundantly clear from what has emerged from government over the past two years – a commitment to a constitutional amendment, generous discounts (for the state, when taking property for land reform) through property valuation regulations, an Expropriation Bill that extends the scope for seizing property without payment, and the report of the advisory panel on land reform.

President Ramaphosa’s assurances at the Summit that his government is ‘committed not only to safeguard property rights, but also to ensure that all our people have an equal opportunity to exercise such rights’ falls down not only in the face of its legislative and regulatory agenda, but in its actions. For it has recently fought a long and expensive court action to avoid acting on a commitment to sell a property to a black farmer, David Rakgase, who had been working it for close to 30 years. Papers submitted on behalf of the department were very revealing: ‘Black farming households and communities may obtain 30-year leases, renewable for a further 20 years, before the state will consider transferring ownership to them’.

Indeed, there have been indications that the ultimate objective is to abolish private property in land altogether, possibly through a constitutional amendment that vests all land in ‘the people’ of the country.

The encroachment on private property is not limited to land. President Ramaphosa was quizzed extensively about the country’s state-owned enterprises. What he failed to mention was that the Government is seriously looking at raiding pension funds through prescribed assets legislation. Said the President earlier this year: ‘We are facing a situation where our financial resources have been depleted and our developmental needs are enormous. In other places, pension funds are being used to generate investments.’

Not only is this likely to be seen as a warning on the security of investments, but it carries the strong sense of a means of evading those tough choices on South Africa’s portfolio of loss-making state companies.

Perhaps less visible are South Africa’s racial empowerment policies. It is perhaps a measure of how entrenched official commitment to these is, that they are typically not mentioned in the context of South Africa’s economic challenges, even to defend them.

Yet this is a matter of profound importance, raising the costs and compliance burden of investment. Broad-based Black Economic Empowerment policies have been frequently cited to us (as the Institute of Race Relations) by business people as a significant hindrance to their operations. This is supported, for example, by research undertaken on small- and medium-sized firms by SBP. It was also raised as a key problem in a European Union discussion paper last year.

Demands for ceding ownership, or the costs of undertaking equity equivalents, are an especial disincentive.

Yet these policies, probably for predominantly ideological reasons, remain central to official thinking.

Similarly, there is the prospect of ramping up employment equity legislation through empowering the minister to set ‘targets’, and to wield a big stick at those who do not perform to official satisfaction. Employment and labour minister Thulas Nxesi has been clear about the intention: ‘We are now going to be hard. We are very clear, those who do not comply must face the music. Those who do not comply must be punished.’

It is only logical that this pushes investment away. The economic springtime that the country needs is postponed indefinitely or ignored entirely. For the moment, the country’s prospects are frozen.

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Terence Corrigan
Terence Corrigan is the Project Manager at the Institute, where he specialises in work on property rights, as well as land and mining policy. A native of KwaZulu-Natal, he is a graduate of the University of KwaZulu-Natal (Pietermaritzburg). He has held various positions at the IRR, South African Institute of International Affairs, SBP (formerly the Small Business Project) and the Gauteng Legislature – as well as having taught English in Taiwan. He is a regular commentator in the South African media and his interests include African governance, land and agrarian issues, political culture and political thought, corporate governance, enterprise and business policy.

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