President Jacob Zuma, centre, accompanied by his Cabinet ministers, listens to former UK Prime Minister Gordon Brown at the Africa Infrastructure Breakfast at the WEF Congress Centre on Friday.  Picture:  GCIS
President Jacob Zuma, centre, accompanied by his Cabinet ministers, listens to former UK Prime Minister Gordon Brown at the Africa Infrastructure Breakfast at the WEF Congress Centre on Friday. Picture: GCIS

IF SA is to have any hope of reverting to 5% or more annual growth in gross domestic product (GDP) and overcoming its huge unemployment problem, the African National Congress (ANC) has to change its approach to the business sector radically.

It is natural that in the period since 1994, the governing party has been preoccupied with transformation and poverty alleviation, particularly. It has made significant progress in reducing abject poverty through the social grants system and, for example, through the extension of clean water and electrification services to disadvantaged communities.

In transformation, there have also been achievements, with the emergence of a far larger and stronger black middle class and the increasing involvement of black executives and shareholders in business.

Overcoming the destructive legacies of apartheid had to be the direction and obsession of the post-1994 government. But, what is needed now is something radically different. Above all at this time, perceptive and strong leadership is required, to effect the necessary change.

We are in crisis and on the brink of recession and a potential rating downgrade to junk status. There is a flight of capital from SA and the rand is in an alarming slide. With this background, growth and employment creation are impossible.

From a practical and fiscal point of view, a limit has already been reached on increases in employment by the government sector and the associated salary costs that have to be met since the recent increases to public sector pay levels.

If we go further to any significant extent in this, we risk following Zimbabwe’s precedent. So, the government has to understand that the growth and employment that is required can only be from the private sector — from business.

For historical reasons, the ANC has tended to be wary and suspicious of business and has regarded it as collusive with the previous apartheid government. It is also natural that when a lot of its support comes from the South African Communist Party and the Congress of South African Trade Unions, which both have an inherently antibusiness bias, it is influenced accordingly.

However, there now has to be a change for SA to break out of its current crisis cycle. The government has to engage with the business sector strongly and encouragingly, to promote investment and growth.

Domestic and international business investment confidence in SA has taken a pounding in the past couple of years. Local companies see better prospects for investment abroad — often elsewhere in Africa — and have withheld investment here. In short, they are in a funk.

Most foreign companies now regard SA as an unattractive investment destination, complicated by regulatory difficulties and uncertainty, aggressive labour unrest and the complexities of the black economic empowerment (BEE) requirements. Several, particularly in the mining sector, have demerged their South African activities and listed them separately, to avoid "tainting" and derating their globally listed shares.

THE effective BEE requirement locally for a perpetual "free-carry" shareholding of 25%-plus for blacks in their operations here makes many of them uneconomic by global standards. They are investing elsewhere.

The government has to recognise that for the economy to revert to growth, there have to be strong steps to tackle all of this, by developing local business confidence, investment by overseas businesses in our economy and a far stronger effort to support and encourage new small business creation.

It has to change its attitude to the business sector and to foreign investors, in particular, and has to treat them as its welcome and essential partners for growth.

It could learn from the way in which communist China took over Hong Kong from the British. Mindful of the fact that Hong Kong had a vibrant and highly successful free-enterprise economy that they did not want to damage in any way, the Chinese consulted with the British on maintaining continuity, confidence and growth ahead of and during the transition to mainland sovereignty over the territory.

Whenever a Chinese government statement or action inadvertently affected confidence in the business community in Hong Kong, the Chinese authorities listened intently to the concerns expressed by the governor and his staff and reacted accordingly to limit the damage or, if possible, to correct it. They understood that business confidence is a fragile thing, easily damaged. The ANC clearly doesn’t.

Many actions and statements by the government have been intensely undermining to business confidence in the country, and particularly to overseas business confidence in it. An example is the suggestion that foreigners should hold land in this country only on a leasehold basis.

To target foreign investors in this way, to discriminate against them and to affect the value of their investment adversely in this manner, is precisely the kind of signal that is desperately off-putting, for all foreign investors, in whatever sector of the economy.

Likewise, the cancellation of foreign investment protection treaties and their replacement by a uniform one that is not so strong and that anyone can see contains hidden threats, such as there being no compensation for assets, which become subject to so-called "custodianship" of the state — has been disastrous for SA’s investment image.

When SA had 70% of the western world’s gold production and was the mining capital of the world, it could make mistakes (even absurd ones such as apartheid) and still attract investment and grow. In the past couple of decades, we have become a minnow by comparison with other mining states and our attractions as an investment destination have become severely compromised and prejudiced.

The government needs to recognise these realities and to interact strongly with representatives of the business community to tackle its concerns and to respond positively to its constructive suggestions. This should be a high-profile exercise, with constant and ongoing involvement between the Cabinet and business representatives.

LET the business and investment communities understand that their worries and apprehensions are being attended to, and let them be seen by the public and by international business to be tackled.

Simultaneously, there should be a pro-active programme to attract and promote investment in SA by foreign businesses — why do we see constant TV advertisements to "invest in Macedonia", "invest in Bahrain", and so forth, and none for SA?

The environment for small business development should be improved radically, to promote and encourage this recognised engine for employment creation. For example, businesses below a specified level of turnover should be permitted to reduce their staff if necessary, without going through the current huge hurdles involved in this, the fear of which undoubtedly inhibits taking on new employees.

Curle is a former merchant banker and corporate finance executive who has served on the boards of several JSE-listed companies