SOUTH Africa faces two looming crises and, apart from enormous verbiage and a handful of success stories, seems unable to come up with solutions to either.
The two are linked and together form a vortex that we should not ignore. But ignore it we will — the solutions require far more foresight and courage than our business, political and labour leaders possess. The first crisis is that we have millions of young and unemployable people who have been failed by the school system, which has left them ill equipped for the world of work; by industrial policy, which hasn’t created a commercial environment that generates enough suitable jobs; and by trade unions, who have locked them out of the few formal sector opportunities that exist.
I am, perhaps unfairly, letting business off the hook, even though the private sector has, with a few notable exceptions, shown remarkable venality and cowardice when it comes to taking principled stands against those politicians bent on abusing the system.
I leave them out of this criticism because there is unfortunately limited space for them to speak out, and the consequences for doing so in a country so reliant on public sector spending and political patronage can be extreme.
In any case, all sectors are quick to absolve themselves of responsibility and to heap the blame onto everybody else, but the fact that this is the case some 23 years after Nelson Mandela took his first steps as a free man is due to the failures of all of them.
The second crisis is we seem to have lost the pragmatism that guided democratic South Africa’s founding parents during the tense negotiations that lead up to the first "proper" election in 1994 and the adoption of the constitution soon thereafter.
As a nation we have become great at figuring out how to get cellphones into every hand, beer into every tavern and cigarettes and knock-off DVDs onto every street corner, but we have failed dismally at sticking to the script when international investors are watching. We also don’t do a great job of implementing plans when there is any resistance.
Think of the fight against the state’s National Development Plan (NDP) by the trade unions or the reintroduction of school inspectors, again quashed by the unions.
The government maintains its support of the NDP, saying all its policies will be aligned to the plan, but I will be guided by recent history when I assess its chances, especially in the buildup to a closely fought general election in which the African National Congress will rely heavily on its union buddies to boost voter support.
The consequences of this lack of pragmatism are starting to be felt and there can be no question that we are being left increasingly vulnerable to the vagaries of the global economy. It has long been the case that, as a country, we consume far more than we produce and that our books get balanced by foreigners.
This money that flows in can, just as easily, flow out again. Foreign exchange inflows rely heavily on precious metal sales and "hot" money. If the world falls out of love with emerging markets and stops wanting as much gold as it has done, then we have to rely on selling what we make and consuming less if we don’t want the currency to fall out of bed. Unfortunately, South Africa does not make enough stuff and we are hopeless savers.
This was borne out by statements this week by Business Unity South Africa special policy adviser Raymond Parsons. He warned that once the US rolled back its policy of quantitative easing (see this week’s Financial Mail cover story on "Life After QE" for more) investors will stop pumping so much money into markets like South Africa.
These flows had provided a level of protection against the Great Recession but now that they’re going to slow, that shield is being removed. Because of the size of our external funding requirement, we are more exposed than most emerging markets.
Mr Parsons said it was essential that South Africa started making itself attractive to investors interested more in long-term productive assets than in short-term, high-yielding assets.
He is right when he says that the NDP’s long-term growth and development strategy could help South Africa become a more attractive investment destination.
Unless we crack the obstacles to investment there is no chance that a comprehensive and sustainable solution to youth unemployment can be found. You cannot create jobs without investment and local savings is simply too low to do this without a lot of help from abroad.
Without a pragmatic understanding of what investors are looking for, and how many alternatives they have, this investment will simply go elsewhere.