Red carpets, not red tape, needed to attract FDI to South Africa
By Neil de Beer
JOHANNESBURG - Here we are, South Africa first - only red carpet, not red tape.
Now, what red tape am I referring to? I am referring to government bureaucracy that has been stifling the economy over the past 20 years, because a country’s political stability and economic growth are important factors to attract foreign direct investment (FDI).
Research has shown that FDI flows into South Africa fell by 74 percent in 2015, with the decline being far steeper than the rest of the continent. This is alarming for South Africa, which has the most advanced, broad-based economy in Africa, with infrastructure to match any first-world country.
So how can we improve the FDI inflows to the country in our SA1ST Master Plan, which will only display red carpet moments?
* Increase the knowledge of black economic empowerment (BEE) policy compliance in South Africa to foreign direct investors. BEE can be seen to contribute to FDI, since it promotes skills development, economic participation, and the creation of an emerging middle class, which supports an entrepreneurial class.
But South Africa first needs to win the confidence of foreign investors as a viable market to invest in. Domestic firms need to lead the way and show trust in the economy. This will involve addressing the underlying confidence issues in the economy, which will address the unemployment or unofficial unemployment rate of 65percent, depending on which statistician you ask, in my view.
* In 2017, Cape Town was rated among the top cities for foreign direct investment. However, this has dramatically changed in just three years. Cape Town currently is rated the eighth most violent city in the world by the Mexican Council for Public Security and Criminal Justice.
I assume that our other main cities are affected too. We need the deployment of anti-gang units in these cities, as they are crucial for FDI. If not done, it will and can affect the tourism sector as Covid-19 has already taken a bite.
The government needs to make the tourism industry attractive, irrespective of Covid-19. The majority of South Africa’s youth falls within one of three categories: uneducated, unemployed, and unemployable according to Statistics SA (StatsSA). Just imagine the Gautrain with no tourists and no employers. It will be a blue and gold train with no golden meaning for the people of South Africa. Economic distress was the norm even before the coronavirus outbreak. Illness, ill-fortune and economic precarity existed long before this pandemic. The outbreak only makes the economic crisis broader, deeper and more visible.
* For all these strategic, yet effective, plans to materialise, the “political-administrative interface” of government must have a good relationship both in theory and practice. And, there are good reasons for this. If a government’s bureaucracy is too insulated from political pressures, senior officials may be less responsive to serving the sitting government’s interests and electoral mandate.
On the other side of the coin, a highly politicised bureaucracy staffed by under-qualified and inexperienced but politically connected incompetents also invariably compromises the State’s ability to deliver on its democratic mandate.
We need a bureaucracy that is capable, incorrupt, impersonal and merit-based and is run according to simple, proven management routines to complement our strong judiciary and ailing democratic accountability so that South Africa can move towards being the well-functioning state its people deserve and place on the red carpet for foreign direct investors.
It was mind-blowing that last year government needed a new economic advisory panel to bring tangible change to the economy even if data produced by StatsSA, the SA Reserve Bank’s economic research were sufficiently clear about what was wrong in the economy and how to fix the problems.
We the South Africans are seeking a change of leadership and governance to make our country an attractive land on the southern tip of Africa.
We need a leadership group that allows drive and conviction.
Neil de Beer is the president of the Investment Fund Africa and advises numerous African states on economic development. www.ifa.africa