South African businesses have their heads buried in the sand and do not wish to acknowledge what the concept of “transformation” means for their operations, independent economist Nico Czypionka told a breakfast meeting of the Italian-South African Chamber of Trade and Industries on Tuesday.
“There is not enough debate about what transformation means and its implications for South Africa. Government does not admit to failure and business sticks its head into the sand. Both sides rely on wishful thinking in the belief that ‘alles sal regkom’ [Afrikaans for everything will be alright in the end].
“Transformation means a redistribution of economic power and anybody opposing this is shot down as if he were opposing motherhood and apple pie. If we look at the sector scorecards, businesses have not come up with counterproposals, but rather just haggled about the percentages,” Czypionka said.
He noted that the change in government in India has led to a sudden loss of confidence among investors, as the new Congress Party is perceived to move back to a more activist state role, which is what the African National Congress seems to moving towards after its victory in the April 14 elections.
“After following international best practice in the past decade as the government deregulated, lowered tariff barriers, privatised and eased exchange control regulations, we now seem to be shifting back to the activist state as envisaged in the Freedom Charter with its control of the commanding heights of the economy. This has been dressed up in the clothes of ‘representivity’, a term found in no dictionary, but invented by academic nutters,” he said.
Czypionka said the dynamics of the debate are very one-sided, with the government setting the agenda and anybody in the private sector questioning the basis for transformation and its effect on efficiency coming under direct and personal attack.
“The result is that investors have voted with their feet and most large businesses have invested offshore and been reluctant to invest here and hire workers. This has meant a deterioration in the soft fundamentals as hidden charges and administrative inefficiency raise costs.
“That is why telecommunication costs are 10 times more than in developed countries and why apart from the crime factor, the grind factor makes foreign investors reluctant to invest in South Africa.”
Czypionka concluded that if the government does not scale back its social engineering and send out pro-business messages in terms of abolishing exchange controls and increasing the pace of a stalled privatisation programme, then South Africa will not achieve the 5% to 6% growth that is necessary to stop a downward spiral, as redistribution should flow out of growth, not distribute a static pie. — I-Net Bridge