September
12
2011

by Clem Sunter

The level of anxiety is definitely rising in South Africa. As Chantell Ilbury and I say, we cannot eliminate your anxieties; but we can structure them in a way that you can have a rational conversation about them. We still think the scenario gameboard we have used for the past few years, to examine different possible paths that South Africa could take, is relevant. Here it is:

 

We have been in the Premier League since 1994 when we became a proper democracy. It consists of the 59 nations listed in the IMD World Competitiveness Yearbook which comes out in May every year. After the turn of the century, we were in the mid-to-late 30s, which is where we should at least be given that we are the 32nd largest economy in the world. However, we fell to 53 in 2008 because of international concerns over the quality of our infrastructure, especially in light of the rolling black-outs of Eskom.

In 2009 and 2010, we were promoted back to 48 and then 44 as none of our banks had to be bailed out during the financial crash. By contrast, in 2011 we were dumped back to 52 on account of policy uncertainty having an adverse impact on foreign direct investment. So we are back in the relegation zone and there are three scenarios over the next five years.

The first is that we get our ducks in a row and move back into the 30s where we rightfully belong. We are the only African country listed in the Premier League at the moment. The second scenario is that we fail to get our ducks in a row, shoot a few own goals and get relegated into 2nd Division. We lose our premier position in Africa to Nigeria, they replace us on G20 and we join the bulk of the Third World – poor but peaceful. Companies will still make money here as they do in other Third World economies, but for the government it will be exceedingly tough. They won’t get the tax revenue they got in the Premier League and they certainly won’t get the access to international capital that they currently enjoy – just when Eskom needs another R800bn for its next generation of power stations.

If the flag of violence goes up, we move into a scenario called Failed State where we join the likes of Afghanistan, Somalia and Libya. Other nations turn their back on us because we are too unpredictable and violent for any kind of trading relationship whatsoever. Obviously, the violence in South Africa at the moment is nothing like it is in Libya even when you include the statistics on violent crime. So we accord this scenario a wild card probability of 10%.

Nevertheless we have four subsidiary flags which – if they start rising – will increase the probability of this scenario. The first one is nationalisation – which will be viewed by the majority of the world as an extremely retrogressive step. The second is a clumsy implementation of national health insurance which leads to a decline in private medical care. The latter will trigger another major exodus of young talent from this country, as their major priority is quality education and healthcare for their children.

The third flag is a media tribunal with punitive powers. The first journalist that is sent to jail for spilling the beans on a prominent individual will trash our reputation of being a liberal democracy at the tip of Africa. Moreover, it will open the floodgates of corruption as it will no longer be counterbalanced by the fear of exposure. The fourth flag is an outbreak of land grabs which will surely lead us down the same path as the country north of us.

None of these subsidiary flags are raised at the moment; so we put the Failed State scenario on one side as a wild card and concentrate on Premier League versus 2nd Division. We have three flags to decide whether we are going up to the first or down to the second scenario. The first flag is around inclusive leadership as it is those nations that are united as a team which have gone up the Premier League fastest. The outstanding example is Singapore which in 2011 is No 3 after the US and Hong Kong who are joint No 1. We give Jacob Zuma a tick in this category; but we are as worried – as most people are – about some of the divisive statements coming out of the ruling party. The last thing South Africa wants to become right now, given the global hard times, is a racially polarised team.

The second flag is about pockets of excellence. If we use our pockets of excellence to raise the entire performance of the team, good flag. If we dumb them down, exceedingly bad flag. SARS, the Red Cross Children’s Hospital in Cape Town and 5 000 out of 28 000 schools are pockets of excellence which can be used to inspire others to better performance. The worst outcome would be the politics of envy and dragging them into mediocrity.

The third flag is around creating a strong new economic order, bearing in mind that there is no example of a country that has grown at more than 7% per annum for more than 10 years that is not outward-looking. We need to play to our strengths in the intensely competitive export game by concentrating on going downstream on our resources, converting the success of last year’s Soccer World Cup into becoming a premier tourist destination and leveraging off our current status as an influential gateway into Africa (Walmart being a good start).

On the internal economy, it is all about creating a culture of entrepreneurship and a supportive environment in which that culture leads to the formation of one million new businesses by 2020. Thereby five million new jobs will be created. China opened the doors to entrepreneurship in 1978 and is now the second largest economy in the world. The US has always celebrated entrepreneurship, innovation and individual excellence.

At present, we give a 50% probability to remaining in the Premier League (down from 60% a few months ago as a result of our eight-place drop in the 2011 global rankings). We give a 40% probability to a drop into 2nd Division. If you combine this figure with the 10% probability for Failed State, it is now 50/50 on whether we stay above or go below the central line on our scenario gameboard. We are at a tipping point, and that is why we need a Codesa III to discuss how to liberate our economy and give the entire citizenry their economic freedom and self-esteem


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2 Responses

  1. This particular definitely answered my trouble, thank you!

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