Let's get going on crucial reform


President Cyril Ramaphosa's investment envoy, Jacko Maree, says he would like to see some of the changes Ramaphosa "talks about happening a lot quicker".

"I think all business people would support that," he says.Whatever the factors that may or may not be constraining the president, he says, "we would like to see more rapid movement".Maree, former Standard Bank CEO and currently chair of Liberty Group, was among business leaders at this week's Business Economic Indaba in Sandton organised by Business Unity SA.

He will be trying to woo investors at the UK-Africa investment summit in London tomorrow, and the World Economic Forum in Davos thereafter. Business leaders used Ramaphosa's presence at the indaba to vent frustration and alarm at the lack of reform in SA as it heads for an almost certain downgrade to junk of its remaining investment-grade rating. But Maree corrects me when I call it a crisis meeting. "The way you're talking it's almost as if there's a real disaster here. That's simplistic and wrong. I don't get that sense. The stock markets are not reflecting that.

"A projected economic growth rate of 0.7% is not a disaster? "That's a result of the last six years of mismanagement, etcetera. It's not something you can just turn around with the flip of a switch."The government can change policies, it can improve things. The question is what the time lag is going to be before we see growth coming through."There is a need for greater urgency, he says."I think we all agree that it would be far preferable if we could move quicker down the different paths that have to be improved."Ramaphosa showed in his hour-long speech to business leaders that "he is very much seized with the economy and with growth"."He talked about the need for investment, because clearly how do you kick-start an economy that is hardly growing at all?

"Typically, in the Keynesian world, the government would spend a whole lot of money building infrastructure, which clearly they don't have the money to do."Or you'd get state-owned enterprises to do that, but clearly the SOEs are constrained and don't have the ability. Or you would lower interest rates and encourage consumers to spend more, but we know that would be irresponsible in the present South African context. Or you could be hoping for a big boom in commodities. "If you scrap all those things as levers to pull there is only one lever left to pull to try and get the economy growing faster, and that is more private sector fixed investment, foreign and local.

"That is the only real lever you've got to pull."He says he believes that Ramaphosa "understands clearly" that to get more fixed investment, businesses have to see opportunities for growth and expansion."That requires business confidence, but we know that business confidence is very sluggish and is not improving. "Ramaphosa went through things that are being done to change this, such as improving spectrum, the Mining Charter and ease of doing business. These all require government departments to make policy changes, all of which will help build confidence.

"Maree concedes people may be sceptical, having heard it all before."The fact of the matter is we've had two investment conferences and at both, commitments of more than $20bn [R300bn at the time] were made."He doesn't share the doubts about these so-called commitments."These things are audited and so forth, so that is real investment that is planned over the next number of years."How much of that would have happened anyway, and how much is due to the interventions of the president and his administration? "Some of it would have happened anyway, because what you're talking about is capital expenditure."It doesn't matter whether it's new investments or upgrading existing investments. It improves the productive capacity of the economy.

"Is Ramaphosa's target of $100bn over five years enough?"Some economists would say you need much more than that. We as envoys are just desperately trying to talk to as many foreign and local companies as we can about their plans, and try to clear the blockages or obstacles."We can't change government policy or tax rates, but have certainly been able to get urgency into approvals for permits and licences or whatever."He says the role of politics and presidential speeches in investment decisions is "smaller than people think".Investors look at the track record and the prospects for long-term returns.

"Company boards don't sit down and start with all the political stuff. They start with the hard-nosed business things."Amazon Web Services said, 'We're going to build our cloud computing infrastructure in Cape Town for Africa.' Why? Because there's good laws and things basically work in SA much better than pretty much any other country in Africa."Politics would have been "quite a small part" of the decision. Maree says that because of the political situation, "people assume that there's not much investment happening. There actually is if you look at the facts.

"Why aren't we seeing the impact on jobs?"There are many factors that affect growth. Investment is only one lever. There are many other levers which we know are hurting us ."For most businesses, Eskom and blackouts are "very high on the agenda". Does it help that while he's trying to lure investors the president is emphasising, as in his speech at the indaba, the government's determination to implement expropriation without compensation? "That has been the case for how long now? And investment is still happening. "Only agri-businesses see it as a serious threat, says Maree. "For most companies it doesn't feature. Nobo dy's anticipating their shares or whatever are going to be appropriated.

"Do potential investors ask how long Ramaphosa will be in power? "They're more likely to ask about incentives and lower tax rates," he says. "Hard-nosed business things."


LINK : https://www.timeslive.co.za/sunday-times/business/2020-01-19-lets-get-going-on-crucial-reform/

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