A game of broken telephone
‘Money has no loyalty. Investors take it where they will receive the most returns. If South Africa is perceived to be failing or adopting the wrong policies, investors withdraw their money and take it elsewhere—simple as that.”
Not my words, but those of a stockbroker based in Geneva.
Stockbrokers may not be everyone’s cup of tea for an exciting, engaging conversation, but talk to them about the markets and they become animated and engaging. One also begins to get an idea of how fluid markets are and how difficult it often is for those wanting to promote South Africa abroad as a worthy repository for foreign direct investment.
Everyone knows that perception and reality are different, but politics and the markets are unfortunately more often than not all about perception. It’s often not what you say but how and when you say it. Maybe this is what led Minister of Finance Trevor Manuel, in a fit of frustration a few years ago, to declare the markets “amorphous”.
The questions we have to ask are: has the African National Congress-led government not worked hard to satisfy investors (often at the risk of offending its alliance partners) that it is on track to cut the deficit, to meet inflation targets, restructure state assets, privatise and entrench principles of good governance, transparency and accountability? Has it not been making strides in delivery of basic services to the poorest of the poor?
While the answers to these questions are debates in themselves, the hard facts are that the government has delivered much in key areas. Under an ANC-led government more people have access to housing, water and education than ever before.
If perception is that important then part of the key to success in procuring foreign direct investment must be the way in which information is packaged and the way in which it is filtered through to those who matter. Granted, the media don’t always play the game and sensationalism often wins the day. However, in the information age governments need a counter-strategy: one that sees information packaged in a quick, easy and accessible way. These counter-strategies need to entail articulating and motivating government policies in a clear and unambiguous manner.
Sadly, this has not always been the case in South Africa. At times it has led to a tumble in the currency and frustration on the part of the government and those in business who so desperately want the country to succeed. A few examples immediately spring to mind, the most pertinent being the premature leaking of the Draft Empowerment Charter for the mining industry. Of course, black economic empowerment was always going to scare the wits out of investors and local business. That it is necessary is beyond question—how to package the information and the policy initiative is the rub.
The markets despise unpredictability and a leak of this nature was certain to see the rand battered. The garbled message heard by the markets was “ANC to nationalise 51% of the mining industry in 10 years’ time”. The conclusion reached (incorrectly) was that South Africa was going the way of Zimbabwe. And so the task of communicating government policy becomes like playing a game of broken telephone. What should investors and stockbrokers in London, New York and Geneva have heard instead?
They should have heard that black economic empowerment is necessary and urgent precisely because we want to prevent a Zimbabwe-type situation. If South Africa is to succeed black people need to be integrated into the economy quickly and efficiently. This needs initiatives by the government, but also the systematic “buy in” from business. If the government drags its heels the country will be worse off. The current situation where the wealth of the country lies in the hands of a minority is unsustainable and unwise. Foreign investors may be able to understand this line better.
A similar misunderstanding has arisen around the issue of the provision of housing to poor communities. The Community Reinvestment [Housing] Bill was severely criticised by financial institutions. The key to making investors understand the need for the legislation is that the government needs partnerships with banks and other financial institutions to realise the constitutional imperative of housing for all.
It’s a unique way of going about providing housing for the poor, but necessary. Again, however, investors have only heard gloom and doom, and sometimes defensive replies from the government when explaining its policy. Investors simply fail to understand what the government is trying to do and why. Perhaps, annoyingly, investors sitting in foreign climes invariably lack the understanding of the complex South African political environment, but the challenge is to explain, explain, explain, and so sell South Africa boldly and convincingly.
Of course, there have been times when no amount of explaining could extricate the government. The HIV/Aids issue comes to mind. The harm this issue has caused South Africa’s image abroad is unfortunate, to say the least.
As a solution, the dreaded word “spin” comes to mind. It has worked before—Bill Clinton had George Stephanopolous and Jimmy Carville, Tony Blair had Peter Mandelson until he fell on his own sword, and Nelson Mandela, always floating above the dirty business of politics, was his own talisman.
Who will do it for the Mbeki government? It is well-known that President Thabo Mbeki and his administration are no lovers of “spin doctors”. Fair enough, but with important and complex issues such as tripartite alliance politics and socio-economic delivery’s high place on the agenda, a comprehensive and intelligent communication strategy will urgently be needed to make South Africa’s case to foreign investors.
We have the goods, now let’s sell them.
Judith February is the manager of the governance unit of the Political Information and Monitoring Service at the Institute for Democracy in South Africa