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Patrick Bond debates Sihle Zikalala and Vasu Gounden on the state of South Africa, eThekwini Progressive Professionals Forum, 25 November

SA ‘is not in a crisis’
Edward West 27 November 2015

ANC KwaZulu-Natal provincial chairperson Sihle Zikalala and University of KwaZulu-Natal professor Patrick Bond at an event in Durban.

Durban - There are big challenges facing South Africa and its economy, but the country is not in a crisis.

This was an over-riding conclusion of a debate held by the Progressive Professionals Forum in Durban this week.

The question is pertinent - there are daily public protests that attest to service delivery failures, dysfunctional government departments and state enterprises, high levels of crime and of corruption in both the private and public sectors, low economic growth, a devaluing currency, high unemployment and the highest social inequality in the world.

The panellists were social sciences professor Patrick Bond from UKZN, newly appointed ANC chairperson Sihle Zikalala, Ebrahim Patel from the Minara Chamber of Commerce and Don Mkwanazi, businessman and a founding member of the Black Management Forum.

Professor Bond, taking on the role of a foreign investor, said the fact that the World Economic Forum has listed South Africa as having the most volatile labour force out of 140 countries, was likely to scare off potential foreign investors.

On the other hand, average corporate profits in this country were rated as the third highest in the world after Indonesia and Denmark, said Bond.

He said SA’s biggest foreign investors were now the likes of De Beers, Old Mutual and SABMiller, all former South African companies, who invest their profits mainly in other countries.

Bond said the neo-liberal policies of the government meant SA was very good for foreign investors in that billions of rands in profit and dividends were allowed to exit the country every year, instead of being invested in the local economy.

The government should reconsider exchange controls, said the professor.

Zikalala said the country still faced many challenges, and it was financially impossible for the government to address all of them in a short period of time.

He said a “social contract” was therefore needed between all players in the society, government, labour, business and other organs of civil society, so that the challenges could be addressed jointly.

“It is high time the private sector leads by example,” he said.

Zikalala said in the past three years the percentage of the economy “going to Africans is shrinking”, while economic power was growing again for “white males”.

Mkhwanazi said: “Let us not deceive ourselves about the rainbow nation. The people who are suffering are the poor.”

He said salaries being paid to corporate executives were “obscenely high”.

He suggested the Japanese model, where one third of a corporate’s profits were shared with the providers of capital, one third divided equally between management and workers, while the other third was reinvested in the business.

Mkhwanazi said the corporate sector was “sitting on top of billions of rands” in their bank accounts, but were doing nothing with the money.

“They are looking for cash cows, and have forgotten one critical aspect of doing business, in that it entails risk.”

Patel said the government had good policies and programmes in place, but implementation was poor.

The private sector and government needed to build a far more robust relationship, he said.
Professionals in audience during the debate also complained about Black Economic Empowerment becoming a “tick box”exercise for corporate.

One said the government needed to work more on skills training, because “no company is going to teach people the skills to be a serious competitor of that company in a few years”.

Is South Africa in a crisis?
By Staff Writer on 2 December 2015

The recent Progressive Professional Forum hosted by Deloitte at its KwaZulu-Natal office in Durban saw robust debate surrounding the economic challenges facing South Africa and unearthed a multitude of challenges and possible solutions to the country’s financial woes.

Keynote speakers at the PFF Colloquium were recently elected chairman of the African National Congress (ANC) for KwaZulu-Natal, Sihle Zikalala, and UKZN political economist, Professor Patrick Bond. Although the two disagreed on whether or not the country was in political crisis and was heading towards becoming a failed state, they identified similar economic challenges.

Zikalala, in stating categorically that South Africa was not in crisis, also noted the progress made by the ANC since 1994. He said that South Africa needed to engage in a “social contract” that was binding on government, the civil service, labour and the private sector to solve the country’s problems. Key issues that needed to be addressed, he noted, included the fact that unions resorted to strikes as a means of upstaging competing unions rather than as a last resort and the large salaries and increases going to top executives and heads of parastatals whilst those further down the line languished in poverty.

He said South Africa was running short of “morals and professionalism” and emphasised that there was a need for working both efficiently and effectively if the country was to be productive and ensure it was manufacturing quality products. “We must ask ourselves if we want to be a welfare state or a developmental state,” he noted, adding that government could not afford to support all people and that people needed to be independent in order to free up more funding to address essentials such as improving education and skills development.

Zikalala explained that the economy had structural weaknesses as it was reliant on mineral resources rather than industrialisation and growing manufacturing which would result in job creation. Localisation and beneficiation of raw materials needed to be at the top of government’s agenda with everyone wanting to invest in the country having to establish a manufacturing plant. Only finished product should be taken out of the country.

Lastly, he pointed out that the economy continued to be controlled by white males and, to a lesser extent, the Indian business community. He said that the percentage of economic wealth going to the African population in the province was shrinking. “Those who are better off should share with those who have less to ensure that they can be incorporated into the economy,” he suggested.

Zikalala concluded that there was a need for a shift in the ANC’s focus. “ANC policy has been based on foreign investment and nothing else. Since 2005, we started to debate the South African economic roadmap. The second phase must be characterised by radical economic change.”

Bond stated that he believed South Africa was at risk of becoming a failed state. He agreed that the economy remained in white hands, saying that large businesses were “getting away with financial murder” as they repatriated profits and removed wealth out of the country thanks to government’s relaxing laws governing the outflow of money.

He showed that 23% of the country’s GDP was flooding out of the country – a fact that he described as one of the greatest threats. Much of this outflow was as a result of large corporates such as De Beers and South African Breweries shifting their listings to other countries and taking the wealth accrued during the apartheid era with them.

Other problems identified by Bond included high unemployment, crime and corruption, severe levels of inequality and militancy, dysfunctional state-owned enterprises, the fact that companies tended to hold on to their profits rather than re-invest them, the high debt levels in the country and the Chinese, who had excess capacity, dumping cheap products in South Africa thereby destroying the livelihoods of local manufacturers.

He also challenged key infrastructure projects including Transnet’s investment into ferrying coal to Richard’s Bay which he predicted would become a “crazy white elephant” and the expansion of the container port in Durban (to create the Durban Dig Out port) which he said encouraged and would increase “importing junk” that would destroy local industry.

Stringent debate that followed these presentations also unearthed concerns about gender equality in the provincial economy, the failure of current methods of skills transfer, a need to create sustainable businesses rather than businesses that only lived off government tenders and the fact that South Africa was effectively “exporting jobs” as companies down sized, failed to grow or even closed down because they were unable to compete in global markets.

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