South Africa: from Flavour of the Month to a Bad Taste in the Mouth…

Brand South Africa’s Chief Executive Officer Dr. Kingsley Makhubela is wrong: SA’s decline in the WEF’s Global Competitiveness Index cannot be ascribed to low GDP growth. Makhubela is confusing outcome with cause.

SA’s slippage in the Global Competitiveness rankings and downgrading by rating agencies are mere indicators of Government’s successful pursuance of anti-growth policies and incoherent governance practices.

The apparent dedication by Government to adhere to its obviously disastrous economic course has paid off when junk status arrived. Yesterday the Auditor-General highlighted another success: voicing concern about whether the SABC is a “going concern”. He could have added SAA, Eskom and the Pandora Box of SOEs (State Owned Enterprises).

Clear signals of a downward spiralling economy (and the unravelling of key institutions) have been visible for each and every person and should come as no surprise. The writing has been on the wall for a long-long time.

The figure above captures SA’s downward road by tracking five indices since the policy changes in Polokwane in 2007. SA has dropped by:

• 19 places in the WEF’s Global Competitive Index (Now in position 61 of 137);
• 46 places in the World Bank’s “Ease of Doing Business” rankings. (Now in position 74 of 190);
• 21 places in Transparency International’s Corruption Perception Index (Now in position 64 of 175) and know what to expect when the next rankings are announced in January;
• 29 places in the Heritage Foundation’s Economic Freedom Index (Now ranked 81 out of 177);
• 36 places on Failed State Index of the Fund for Peace (Now ranked 96th of 175). (To be truthful: in the Failed State Index South Africa has not gone “down”: South Africa actually has “progressed” upwards with the number one position being the most corrupt country. In order to compare all five indices on one matrix I had to invert the Failed State data.)

A few weeks ago, commemorating the publication of the National Development Plan five years before, the President said progress was being made, albeit not as quickly as what was hoped for. He is wrong too: Government appears to be dedicated to a quick race to the bottom…

Trend lines usually indicate behaviour and destination: unless remedial action is taken, more of the same is likely to follow. Explaining to a primary school learner that a higher point on the Figure implies “better” and a lower point “worse” would be able to interpret the message of the graphs.

The question therefore arises: why did no-one in Government pay attention and take timeous remedial action? Slippage on one of the indices could perhaps not be taken seriously, but here was a chorus of warning voices. Could no-one detect where things were heading for?

The incumbent in the Union Buildings would probably shrug it off with a “I don’t know about these things”. But what about those hitting the campaign trail as hopeful candidates pursuing either the resurrection of the “good – but apparently dead? – ANC”, or a pace-maker for continued State Capture?

Daniel 5 (Old Testament) recalls a palace orgy of king Belshazzar when a finger appeared writing on a wall: MENE MENE TEKEL PARSIN. The drunk king was shocked sober and made enquiries about what that could mean.

In our case it appears as if all and sundry just ignored the writings on the wall  (see also the Kearney Index on Investment Attractiveness that highlights how SA had disappeared from the radar screen for foreign direct investment). Why did the “king” and “those with him in the chambers” determining economic policy ignore all these warnings from long-long ago. Why did they continue steadfastly wrecking the economic climate?

Their ignorance and determined pursuit of disastrous anti-growth policies and strategies (think Mining Charter, threats to Intellectual Property, equity dilution, running costly inefficient SOEs, poor crime prevention, dismal public education outputs, singing with Bell Pottinger in the White Monopoly Capital Choir, and the list continues) boil down to gross incompetence at the very least.

Ignoring the warnings of a looming train crash whilst pursuing with the very same policies and practices that will cause the train crash implies a determined embrace of the outcome. Government therefore successfully succeeded with radical transformation: the Flavour of the Month phase made place for a bad taste in the mouth…

Low growth with high unemployment is not the cause of SA’s downgrades: it is the result of incoherent policies burdening the enterprises of South Africa.

(In a next blog I will highlight SA’s performance in some of the indicators that make up these indices.  Were it not for the much maligned private sector in South Africa, we would have been much much lower down on the scale.)