Business

Distinguishing economic policy from economic polemics

2019-05-17 12:30

The predominant preoccupation of Cyril Ramaphosa’s one and a half years in office as president of the country has been restoring “business confidence”. This has been critical because, as US economist Larry Summer said: “Confidence is the cheapest form of stimulus.”

It’s been necessary after the Jacob Zuma-led government’s relationship with business which moved from antagonistic to outright hostile.

The fruits of Ramaphosa’s work to restore confidence have been evident. At the 100-day mark, after he became president, Rand Merchant Bank’s business confidence jumped 11 points, something analysts said had happened only nine times since 1975.

As important as businesses confidence is, however, it can’t be the only preoccupation of government. Although it is critical and necessary to make business feel good about South Africa, business “good feelings” cannot be pursued as a matter of government policy.

The ANC has a stated economic policy, which is emancipatory, redistributive and anti-inequality in nature and this policy position must be pursued in the next term if the ANC is to put an end to the continued ebbing of its legitimacy among the people.

What is critical is the actual business output and production as a matter of policy objectives and not the elusive good feelings of business.

This is informed by our experience. In 2004 then president Thabo Mbeki lashed out at Tony Trahar, then Anglo American’s chief executive, because of his statements about persistent political risk in South Africa which led to Anglo American pursuing a foreign listing.

“The reality is that businesspeople in our country have not had it so good,” Mbeki said. “It has therefore been difficult to understand why important businesspeople would continue to hold and communicate negative views about our country.”

This ability to distinguish between business doing well, as a matter of the bottom line and business output and their preferred policy narrative, has always been critical. This is because while business might not care about social policy, which includes fair and higher wages, share options for employees and evident investments in communities, these investments always turn out to have good dividends for everyone involved, especially business.

Business confidence

We need to ensure that as much as business confidence is a critical element of our overall strategy, in itself it cannot be pursued as a matter of policy. There is nothing in the ANC manifesto that talks about business confidence as a policy objective.

It is true, for example, that business has always viewed BEE as bad for business confidence; whether businesses actually do well as entities has always been immaterial. This has resulted in South Africans being unable to distinguish between “white confidence” and “business confidence”, almost as if business confidence is a projection of white fears. As we all know, white fears are based on nothing more than historic prejudices.

The ANC manifesto is very clear on what economic policies must be pursued and all these policies will not harm the material conditions of business but will make a big blow on the so-called white confidence. Our preoccupation is the success of all stakeholders and not the polemics of business confidence which, by the way, have always seen some political parties as good for business confidence and others not, without any particular evidence.

The next five years are critical for the ANC in terms of how it shapes society through its policies, especially the parts of its policies that are viewed as aggressive. We want old boys’ clubs of oligopolies in all industries to be broken down to allow a plethora of new players, particularly black, and we want communities to benefit from companies doing business in their communities.

Of course what stands in the way of the implementation of these policies is business confidence and the accompanying threat of withholding investments to avoid sharing their spoils with other invested stakeholders.

The country has its unique and painful history and it cannot be left unaddressed in the name of business confidence.

Unfortunately, the people have the social power which they give to government and, if businesses does not consider social confidence as important as business confidence, then prolonged industrial strikes will become the order of the day and, in the end, no one will make money.

Having worked for the past two years to restore business confidence, it is important for Ramaphosa to ensure social confidence both in the ANC and the government, through complete implementation of its polices, making it the overarching goal of the next term.

It is critically important for businesses to earn social confidence from their workers and from their communities through continued investments in both.

Most importantly, however, is that the country has its unique and painful history and it cannot be left unaddressed in the name of business confidence.

We have noticed in the past that every time the government introduces a policy to address the injustices of our past, businesses use all their tools of propaganda, which are historically at their disposal, to discredit such proposals as against business confidence. The recent proposals by the ANC for pension funds to be invested in the areas that will benefit and change the lives of those pension owners, the prescribed investments, is a case in point.

Market fundamentalism

Both business and some academics who are either on the business payroll or share the ideology of market fundamentalism have been quick to blackmail any suggested government intervention by pulling loose comparison with failed states. Look at Zimbabwe, look at Latin America, don’t follow their routes as if South Africa does not have its own realities requiring unique government interventions.

The ANC and Ramaphosa cannot afford to go through another cycle of elections with a sense of fear that we don’t have enough social confidence because of unfulfilled promises and a governing approach that prioritises business confidence between elections and comes to beg for social confidence during elections.

The ANC cannot, purely at the screams of others (the markets) and merely at pieces of paper containing policy, roll back on them in the name of business confidence.

Even within the ANC, without honouring its resolutions, by swapping ANC resolutions for business confidence instead of rational conversations with business, Ramaphosa might struggle with re-election.

More importantly, there is no country today that is both successful and has lower levels of inequality without strong government interventions.

In fact it is said that it took 10 years for South Korea to change the World Bank’s narrative that its success was because of some pure functioning of the markets. It was not.

Recently a Singapore foreign minister shared what he deemed their most intrusive social policy, which turned out to be their best and lasting policy contribution to the success of their country. Singapore decided that, in each residential area, there should be a racial balance according to the country’s demographics to avoid concentration of one race in one area and to ensure races are encouraged to live with one another.

Inevitably, when this policy started it received resistance but, after a while, with young generations growing up with one another, that policy has turned out to be the greatest contribution to social cohesion in Singapore.

The ANC has a political and moral obligation to implement its resolutions and, only after its effects are felt, positively or negatively, will it reflect at national general councils (NGCs) and change course or double down.

The ANC cannot, however, purely at the screams of others (the markets) and merely at pieces of paper containing policy, roll back on them in the name of business confidence.

The country’s people deserve to see policies designed to benefit them and they deserve to see those policies implemented.

These policies might succeed or fail, forcing a reflection at NGCs, but they cannot be stillborn in the name of making business feel good.

  • Diko is ANC spokesperson in the Western Cape

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September 15 2019