OP-ed: Business’s path of least resistance to government is a recipe for disaster | Business Day21 Sep 2018, by
Engagement is crucial to help correct unsustainable policies and avert a far more crippling economic situation.
The ice beneath South Africans’ collective feet is getting thinner by the day. The country’s public finances are as precarious as they have ever been and, even before the economy began shrinking, hundreds of thousands of people were joining the unemployment queue every year.
Confronted by the sheer misery of the status quo, the government has resorted to increasingly populist, fiscally unsustainable policies: higher public sector wages, fee-free higher education, uncosted proposals for national health insurance, and an unwarranted resort to amending constitutionally protected rights that has undermined investor confidence yet stands little chance of delivering what its advocates say they want.
Add rising social tensions and increased emigration by skilled South Africans, and the challenges we face now seem deeper than any since 1994. In this context, it is appropriate to ask where SA’s business leaders and organisations are hiding. They appear to be missing in action.
For most of the Jacob Zuma era business leaders refrained from publicly criticising the government. In the face of sustained attacks on the legitimacy of the business sector and the commercial imperative of doing business with a hostile state, business chose to minimise conflict. As the Centre for Development and Enterprise argued in 2015 and again in 2016, this was a bad strategy for a country in trouble.
This “going along to get along” approach ended with “Nenegate”, ratings downgrades and business opposition to attacks on then finance minister Pravin Gordhan, which drew a comparatively fierce response from business leaders. The relaunch of Business Leadership SA in Alexandra in August 2017 reflected a new commitment to engagement from business leaders. The result: an all-hands-on-deck programme of action which, in helping secure Cyril Ramaphosa’s election as leader of the ANC and his subsequent appointment to the country’s presidency, was successful.
Since then the president has taken important steps that have begun to roll back the worst excesses of state capture. In time, these should improve governance across the public and parastatal sectors. Unfortunately, this is not the full story of the past seven months. Much of what has happened on the policy front has been deeply troubling. That business has had little to say about it publicly, and has apparently had little influence over its trajectory, is a matter of deep concern.
Organised business has said almost nothing about the failure to rein in spending growth in the 2018 budget as aggressively as was needed, or about the budget-busting wage deal reached with public servants and Eskom workers. Most surprising has been the subdued response to the ANC’s decision to amend a critical section of what the governing party’s leaders used to say was the “best constitution in the world”.
This decision, taken in haste, is likely to be implemented badly. The government’s near total inability to support land reform beneficiaries or finalise the enormous backlog of conflicting, overlapping restitution claims is ignored as South Africans are asked to trust a mainly corrupt state to implement expropriation without compensation, restitution, redistribution and development effectively. Where will the expertise and funding be found?
And where is the voice of business? Does business’s silence reflect a fading commitment to more active engagement with policy development? If so, it would suggest that business has (already) forgotten the key lesson of the past two decades — failure to remain fully engaged, with the government and in the public square, on public policy issues, usually ends badly. It also suggests that business leaders — who told the Centre for Development and Enterprise in a series of interviews conducted earlier this year that it was critically important that business not “demobilise” — have been unsure how to adapt to the new political realities of 2018.
It is easy to understand why this might have happened. SA is, and always has been, a complex country to govern, making policy choices extremely difficult.
The complexities of race and vast income inequality, as well as the suspicion and hostility many in government feel towards business, mean it is not easy for business to engage the government. Moreover, when it does there is always the risk of damaging political blowback.
The path of least resistance is, therefore, attractive to business even before you start thinking about the many issues about which there is disagreement within the business community. What is the best way to achieve black economic empowerment (BEE)? Should we protect our industries from imports? Do we want a stronger or weaker rand? Is a national minimum wage wise?
Just because policy engagement is difficult for business, it does not follow that withdrawal to its default public silence or going-along-to-get-along position is the right response. This was obvious when the (still present) principal danger was that government officials would loot the fiscus. It should be obvious also when bad policy choices could have even more devastating effects on the country’s long-term prosperity.
The major surprise about business’s response to the disappointments of recent policy developments is that it has failed to make the case — compellingly, publicly – for a much higher prioritisation of economic growth as a goal of policy. In the face of populist, dangerous demands made by other interests, business has failed to make the case for the institutional and policy reforms needed to accelerate growth, or even to make the case against policies that undermine growth.
Politically, there is a great deal going on, far too much for business to engage meaningfully with everything. We would argue, however, that two issues require immediate, co-ordinated business leadership: limiting the damage being done by the debate about (and substance of) the amendment of section 25 of the constitution, and developing a business consensus on the best approach to the country’s deepening fiscal crisis.
Concerning land, business should be making the case in all possible forums that constitutional change is worse than unnecessary — it is a terrible idea. Land reform is not the most important or efficient vehicle for poverty reduction. All the evidence confirms that the failure to achieve more rapid, more successful reform has nothing to do with any constitutional impediments. Badly done, amending the property clause is bound to be enormously costly and disruptive for the economy and the country. SA needs an accelerated but realistic approach to restitution, redistribution and tenure security, and, most importantly, inclusive, efficiency-enhancing urban land reform. Business needs a co-ordinated proposal and public campaign on how SA deals with all aspects of land reform, including practical proposals on how commercial agriculture and other private institutions can help drive success.
Regarding fiscal policy, business needs to stake out a clear, public position on how quickly sovereign debt levels have to stabilise, and the mix of spending cuts and tax policies needed for this.
As importantly, it needs to make the case forcefully that stabilising debt is almost certainly impossible unless the economy grows again.
Through engagement with the government and in its participation in the public square, organised business has to be the voice of growth. This is in its own and the national interest. If business does not make the case for growth — strongly, strategically, with all the resources it can muster — no-one else will. Its failure to do so in recent months represents a wasted opportunity; one it needs to address sooner rather than later.
• Bernstein is Centre for Development and Enterprise executive director.
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