A common refrain throughout 2019, particularly from business leaders, was that South Africa was in dire need of policy certainty.

Early in the second half of the year, for instance, Business Leadership South Africa CEO Busisiwe Mavuso underscored the importance of policy certainty in the vital task of attracting the investment without which we cannot hope for economic growth or job creation.

Mavuso’s instincts seem to be good ones. She has been willing to articulate the gravity of the challenges facing the country with a robustness uncharacteristic of her peers.

Indeed, her pronouncement earlier in the year that President Cyril Ramaphosa had to act swiftly, and do things very differently, to get the country back on track was one to be remembered. ‘The country needs to realise this is our last chance. If he fails to make the right decisions now, we’re going to be another failed African state.’

Notable too were her comments on the catastrophic unemployment data. More than 6.6 million people are unemployed, a rate of 29% by the ‘official’ definition, which takes into account those who have actively looked for work. This rockets to over 10 million, or a mind-numbing 38.5%, if those not working and wanting work, but not actively seeking work are considered.

She is correct that the country is at a precipice. Not only is this level of unemployment out of all relation to comparable developing economies, and not only does unemployment represent a profound socio-economic failing for South Africa, but there is as good as nothing to suggest that a turnaround is at hand. To quote Mavuso again: ‘There are many tough decisions we have put off and ignored for too long.’

Indeed, after flagging unemployment as a crisis back in the 1990s (the African National Congress campaigned in the 1994 election on a promise of ‘jobs, jobs, jobs’), we seem no nearer to addressing it now.

Quite the contrary. We are seeing capital, skills and entrepreneurial talent leave at an alarming rate, a situation reminiscent of the 1980s, only compounded now by the far greater need for the innovation and dynamism that this outflow curtails. Our fiscal position is unsustainable (a South African cliché, but an accurate descriptor in this case) and it’s far from certain that it can improve.

Correctly, Mavuso flagged cloying policy uncertainty as a major disincentive to investment. ‘We need foreign direct investment but until we make the difficult decisions, we will fall into the pit. We need to deal with policy uncertainty. This is a wake-up call for government that they need to do things differently.’

And maybe here she was a little too generous. Policy certainty is critical to investors. The sense that things may change rapidly and fundamentally makes rational planning impossible and heightens risk. Faced with this, it makes good sense to seek alternatives elsewhere. And this is actually one issue where the government concedes its failings. This doesn’t always mean very much, as the country is chronically ‘working towards’ policy certainty.

But policy certainty is not in itself always a recommendation. Certainty of policy may in fact be a major warning against an investment decision – if the underlying policy is bad.

As Mavuso noted, business has, for example, awaited certainty on the question of property rights and expropriation without compensation (EWC). Perhaps, some may argue, the draft constitutional amendment provides some measure of certainty about where we are headed.

But if the certainty that (eventually) emerges turns out be a major encroachment on the security of private property and expands the State’s discretion to seize assets (whether in law or practice), the rational thing to do is to shield oneself from it. Disinvesting in other words. The sense that ‘we are going to take land and when we take land we are going to take it without compensation’ (as President Ramaphosa said in May 2018), or that the country’s land would be nationalised through a constitutional amendment (as Department of Rural Development and Land Reform official Masiphula Mbongwa told an audience at the World Economic Forum in Davos in January this year), or that productive properties have already been targeted for seizure (as the ANC in the Northern Cape announced in March last year), will not encourage investors. The mere ‘debate’ around the issue has been enough to keep investment away. And that EWC principles appear in other areas – prescribed assets, the National Health Insurance plan – can only generate greater concerns.

The country now stands at a uniquely destructive juncture. There is not enough certainty to plan with confidence, but enough to guess the menacing direction in which the country is being steered. Uncertainty and bad policy constitute a perfect set of own-goals. Quite remarkable, really.

If South Africa is serious about dealing with the current malaise, and addressing the unmistakable drift into ever greater crisis, it is well past time that the cautions about the direction of policy are heeded. Time for decisions indeed, starting with taking EWC off the table. Tough decisions, perhaps, though only tough if seen from the perspective of the country’s and ruling party’s gridlocked politics. Relatively simple if intended to deal with the economic problems besetting the country.

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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.

2 COMMENTS

  1. The country has policy certainty, but some “frogs in hot water” [an idiom in English with no known racial connotation] are stuck in denial. What is certain is that:
    • The ANC, under all its presidents from Mandela to Ramaphosa, to a greater or lesser degree, undermine the Rule of Law. Numerous studies have shown that this is an essential for a successful democratic state
    • The ANC-in-government, from 1994 to date have played the RaceCard and doubled down when it is criticised
    • The ANC prefers deploying cadres over competents to key state and SOE positions, placing loyalty above ability. The recent exception at Eskom is an outlier due to its extreme situation (and after offering the post to numerous black potential candidate)
    • The ANC relies upon the unions for electoral support and is beholden to them. Thus cannot stand up to monopoly union demands for unwarranted job security and pay increases far in excess of inflation or productivity.
    • SA is progressively being transformed into a failed state. Functions that once worked (e.g. SARS are gradually being dysfunctionalised)
    • There has been a trickle-down effect of Corruptheid to where many of the most humble cops think bribery is a perk. “The Rot starts at the top”
    • The majority of state functions (security, health, education, transport {taxis}, prosecutions {Gerrie Nel/Afriforum}, courts {“arbitration” increasingly replacing “jurisdiction” — courts — in dispute resolution clauses in commercial contracts}, data over fibre, TV {Netflix}) have been or are being privatised for those who can afford it
    • Unemployment is becoming increasingly structural

  2. South Africa had a set of lunatic policies jointly known as apartheid. The solution was not to amend these policies but to scrap them.

    We now have a set of lunatic policies jointly known as socialism. Tinkering with them won’t work. However there is a lack of political will to make those unpopular decisions, and the leaders are still selling those policies to a brainwashed electorate as the economically and morally right thing to do. I see no way out.

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