Allister Sparks
Measuring political risk is not a science — it’s more a matter of perception. But even using scientific measurements, South Africa looks pretty good. We’ve got through six local and national elections smoothly. Winning the 2010 World Cup soccer bid will boost South Africa’s image. And the Barclays bid for Absa also indicates a growing confidence.
If there is one risk, it would lie with the high level of unemployment and the wage gap.
It is important not to confuse political risk with factors that are disincentives for investors — and current debates confuse the two. What does concern me is that there are billions of rands lying idle on the balance sheets of corporate South Africa.
Why? Not because there is a risk but because people won’t invest unless they think they can make money.
What is causing them to desist? They don’t think the profits will be handsome enough because capital is too expensive. That is an economic and not a political risk. Until locals invest, foreigners won’t. The latter can invest anywhere in the world — they look at their screens and watch profits. I don’t look at black economic empowerment as a political risk factor but it is a disincentive for economic reasons. If you’re an investor, you have to get a black South African partner and he has to get a quarter of the equity in your business — but he doesn’t have the money, so you’ve got to lend it to him. If the enterprise is successful, you get 75% of the profits — but if it fails, you take 100% of the losses.
South Africa is politically secure. We are out of the terrorism zone, although the bleak image of Africa overall is a disincentive.
You hear a lot about labour flexibility among local businesses, but I don’t think it is an issue.
The real issue is cost of capital, because people are looking for profit and capital is too expensive.
In the final analysis, if you isolate political risk, I would say it is minimal.
Allister Sparks is South Africa’s top political trends analyst, as rated by the Financial Mail’s Top Analyst rankings. He consults to Andisa Securities. This is an edited transcript of an interview with Sparks
Moeletsi Mbeki
I don’t see any political risk in South Africa. What many people overlook when evaluating risk is that South Africa had an undemocratic state, but not an undemocratic society.
We have had black political parties and movements dating back to the 19th century. The African National Congress came out of the vigilante movements that originated in the 1880s.
These movements practised democracy internally. There was the democratisation of the missionary churches. There was the trade union movement, which started with white unions and the beginning of black unions ignited by Clements Kadalie’s Industrial and Commercial Workers Union.
In the later years, we had student movements such as the National Union of South African Students and the South African Student’s Congress. So democracy is old in South Africa — it is only at the level of the state where democracy is not already mature.
Black economic empowerment (BEE) was established by big business, so it cannot be a risk factor for the corporate sector.
Neither the Reconstruction and Development Programme nor the Freedom Charter contain any notion of transferring assets from established to black business. Therefore, BEE is a plan by big business to gain allies in the ANC and, in effect, to keep the status quo intact.
Poverty and unemployment are risks — but they are economic and not political problems. Of course, you can’t always divorce the two, but you can’t telescope them, either.
If there is high unemployment, it doesn’t necessarily follow that there is political risk.
We should have a dole system in South Africa, we need to produce more technically skilled people and we need better venture-capital operations.
Moeletsi Mbeki is a rated political analyst and a businessman. He consults to Nedcor Securities. This is an edited transcript of an interview with Mbeki