South Africa’s growth remains both exclusive and woefully inadequate, and ratings agency downgrades, currency depreciation, violent and prolonged strikes are adding to our concerns. Many have commented on the need to create an environment conducive to attracting foreign direct investment (FDI), and while we still attract FDI, we could do far better. Recognised globally as having a robust legal and judicial environment, relatively sound infrastructure, and significant natural resources, SA continues to underperform relative to strengths and our competitors. It seems the investment appeal may not yet be lost, but has certainly lost some of its lustre. Environments conducive to investment globally have several factors in common:

  • Stable and solid public finances
  • Low, simple and competitive taxation
  • Simple and transparent business regulation
  • Strong and impartial rule of law
  • Openness to international trade and foreign investment.

In addition, they have a welcoming environment for foreign talent; good connectivity in the form of road infrastructure, transit systems, ports, airports, education, skills and technology diffusion; and limited but effective government. SA’s regional competitors appear to be making rapid progress on these criteria, while we appear to be regressing. We need to ask whether our government is fulfilling its mandate to create the policy environment needed for a high-growth, inclusive economy.

With approx. 8.5-million unemployed people, one needs to consider the following: the Congress of South African Trade Unions (Cosatu) has as its raison d’etre the protection of (employed) workers. It cannot afford to lose members or to have breakaway unions splintering its power base. At the same time, the ANC relies on Cosatu for votes during elections and thus indirectly supports conditions favourable for employed workers at the expense of the 35% adult South Africans who are unemployed. This conflict of interest is undermining our growth and sends a clear message that vested political interests outweigh the national interest.

When politics encroaches on the economy that it stifles business’s ability to invest, grow and enhance global competitiveness, one needs to be candid. In the reality sketched above, can the government be relied upon to address one of the key conditions for creating a favourable climate to attract FDI, namely a flexible, well-functioning labour market? When unionised workers prevent other workers from getting to work, when factories are forced to close, and when the relationship between business and organised labour is so damaged, the message to the global investor community is that SA is not “open for business” and that a key risk — violent labour unrest — is not being effectively managed.

It is the role of both business and the government to solve the challenges, and also to speak with one voice. We need to tell the world that we are, indeed, open to investment, that we will protect it and enable suitable returns. If SA is to realise its 2030 vision, what we need is the political will to act decisively and relentlessly in favour of economic growth.

This article by Chris Whelan appeared in bdlive.co.za and finweek.com in Sept 2014.