The World Economic Forum’s 2014 Global Competitiveness Report, released last week, shows very clearly that South Africa is, indeed, two countries with two economies.
One is centred around Sandton, which has become the business hub, not just of South Africa but of much of the rest of Africa. The other is based on the seat of government in Pretoria, where derelict state socialism rules, alongside an abject inability to get anything done.
That was the nub of a briefing I attended a day or two ago, given by one of our leading business advisers, who is himself connected to the World Economic Forum. He insisted on Chatham House rules at the briefing, which means I cannot name him, or report anything other than the broadest possible headlines from the session.
One the one side, he pointed to a string of very small numbers: out of 144 nations, South Africa is ranked No.1 in our strength of auditing and reporting standards. We’re not just good, in this area we’re the best in the world. The efficacy of our corporate boards is ranked No.3; protection of minority shareholders, No.2, financing through local equity market, No.3. The JSE itself is rated at No.1 – the best regulated securities exchange in the world.
For a small country with a middling size economy and a significant number of structural constraints, theses are phenomenal achievements and ones of which our business community should be justly proud.
But on the other hand, there are also some depressingly large numbers: we remain at No. 144 when it comes to the quality of maths and science education. In this area, we are the worst in the world. We also prop up the table coming stone last in the area of co-operation in labour-employer relations. Hiring and firing practices – 143rd; flexibility of wage determination – 139th; pay and productivity – 136th. Overall the quality of our education sees us ranked 140th and Labour Market Efficiency 113th.
These are not statistics to trumpet abroad, nor should we try to hide behind defensive remarks like “Oh, these are just the opinions of foreign businessmen!” as we have done in the past.
This is how the world sees South Africa and it’s on this kind of perception that investment decisions are made – or not, as the case may be.
So where does the root of the problem lie?
At the briefing to which I refer, our expert reminded us that only the other week, another paragon of state-backed socialism, India, had abandoned its central planning commission. Even the Indians, notorious for their cumbersome bureaucracy and labyrinthine business practices, have come to realise that business needs less government, not more, he said. Yet in Pretoria, we cling to central planning as if we were in Stalinist Russia.
That of course is part of the problem. At the top of our government are a number of ideologues who still believe that communism hasn’t been given a fair chance, and if we try hard enough, we can make it work here. Place alongside them a number of highly intelligent and capable predators who are making billions off government procurement and tenders and we have a recipe for disaster.
So where does this leave us?
Not in a good place, according to our interlocutor. Sandton-centred business will continue to thrive: world-class, providing a gateway to Africa for both South African and multinational firms. Note that he stressed Sandton and Johannesburg, not broader South Africa. Cities like Singapore and Hong Kong, he reminded us, are gateways – not countries.
The rest of our country will continue to slip backwards, a couple of places down the WEF Competitiveness Tables each year, stuck in a socialist time-warp.
As he put it, Sandton and Pretoria: 60 kilometres and 60 years apart.