Once upon a time there was an organisation called the South Africa Foundation. It was a voice of big business in the apartheid era and it spoke in markets South Africa then considered particularly important. It had offices in London, Paris, Bonn and Washington. Its representatives in those capitals were cultivated, well-connected men who could speak confidently and credibly to captains of industry, policymakers and shapers of public opinion abroad and to those with ears to hear back home.
Yes, they lobbied against sanctions and disinvestment, but they did so independent of the then government. These were no apologists for a wicked system but they did take the unfashionable view that gumming up the economic engines of change was not the best way to go about ending it. What they wanted the world to understand was that, as dire as things looked, South Africa Inc. had the resources, human and physical, to transcend the beastliness of apartheid, and that the centre would hold.
After 1994, the Foundation’s corporate underwriters closed its international offices and rebranded the organisation as Business Leadership SA. They figured full-time overseas representation was now an unnecessary expense and that their purposes could be just as well served by parachuting in an occasional stick of CEOs. Amid the optimism of the Nelson Mandela quinquennium, who could blame them?
The source of South Africa’s reputational problems today is obviously very different from what it was when the Foundation was doing its thing in the 70s and 80s. What is constant, however, is concern about the country’s economic health. South Africa now, as then, is highly dependent on foreign savings and therefore foreign sentiment.
To what extent are our current problems cyclical or structural? To the extent they are structural, what are the chances of their being resolved in the current political and social environment? Does the government have a workable plan and if so is it realistic to suppose that the plan will be implemented? The answers to these questions will determine how much South Africa has left to spend on growing its economy and meeting the basic needs of its people after it has satisfied its creditors.
Not only do the answers need to be good, they need to be communicated convincingly to and by the right people.
As Finance Minister Nhlanhla Nene and the Treasury’s Medium Term Budget Policy documents have made glaringly clear, government spending is on an unsustainable trajectory. The ratings agencies are watching closely to see whether government has the will to win the battles that have to be won if expenditure growth is to be tamed and GDP growth reignited. What’s encouraging is government’s recognition that these things can’t be achieved be by the state alone and that if the National Development Plan’s targets are to be met, the private sector will have to do a lot of the heavy lifting.
South African CEOs who spoke at the Johannesburg Stock Exchange’s SA Tomorrow investor conference in New York last month said they were impressed by government’s new stance. “There’s a reaching out from government that I haven’t seen in 20 years of engaging with them,” said Imperial Holdings’ Mark Lamberti. Amplats CEO Mark Griffiths said he was “amazed by the amount of alignment between what we’re doing as corporates and the NDP…The dynamic has changed.”
Kristin Lindow, the lead South Africa analyst at Moody’s, said she too was hearing about “the impressive ways in which government is reaching out to business.” The conversation was substantive, said Old Mutual CEO Ralph Mupita, especially around questions of deepening domestic savings and mobilizing them on infrastructure. “The dialogue with government has never been higher around the nitty gritty details.”
“We know what the impediments to a faster growth rate are and we are all agreed,” said Standard Bank’s Sim Tshabalala. Treasury sees growth clawing back to 3 per cent by 2017. Tshabalala thought that was on the low side if transport infrastructure and power projects now in the pipeline were delivered on budget and on time.
And if the new entente between government and business paid off, he believed the outlook could be a lot rosier. “Depending on how the Minerals and Petroleum Resources Development Act is executed, you could see that unlock both shale gas and natural gas and we can add another couple of percentage points. There’s a whole range of regulatory and legislative things that need to get done, as well as incentives that need to be put in place, many of them already stacked up, and if they are delivered you could see us pierce 3 per cent quite easily.”
This is a message, and these are messengers, South Africa needs global markets and those who influence them to be hearing loud and clear on a consistent basis, not just at the occasional roadshow.
“One of the greatest reasons for optimism is that South Africans have built world class businesses,” Imperial’s Lamberti said. “There’s a raw and vibrant entrepreneurial culture. South Africans get things done.” He’s right. We routinely get top marks in global rankings for our banking system, stock exchange, corporate governance and the level of protection afforded investors, all of which betokens a strong and sophisticated private sector.
It’s a private sector with a powerful interest in seeing that the country’s story is properly told. The trouble with state-run marketing is that it is too easily construed as propaganda by audiences whose judgement counts. In a time of fiscal triage, government needs to focus on getting value for its rand. Might it not be time to revisit the SA Foundation model?