Sunday, January 13, 2008

Future Challanges for South Africa

Since the election of Jacob Zuma as President of the ANC, one has heard many negative comments from ‘international observers’ and investors into South Africa. Their argument is that Thabo Mbeki has been good for the business community of South Africa, and the business community has thrived but will not likely do so under Jacob Zuma.

When Thabo Mbeki took over from Nelson Mandela, what we first heard was that there would be many reprisals on the white community, this never took place. We also heard that Thabo Mbeki is stealing white business with his Black Empowerment policy, it seems the ‘business’ community has accepted this. The same people who accused Thabo Mbeki of stealing white mines and business say that Thabo Mbeki was actually business friendly.

Jacob Zuma now is supposed to drive investment out of South Africa because he is feared as anti business, all what really is happening is change, fear of change, the same fear that surrounded the coming of Thabo Mbeki. In general the West prefers some sort of stability, they prefer dictators because they know what to expect from the devil they know. Hence in resource rich countries dictators are supported like in the Middle East, incidentally only Iran has actual elections in that region. Mugabe was supported because he brought stability and consistent policy for the business community. Unfortunately democracy in itself has an election process, and this process was won by Jacob Zuma, who must carry out ANC policy as Thabo Mbeki did.

Jacob Zuma would be foolhardy to even try to undo the work of Mbeki, he himself admits that Mbeki is doing well, the problem of course being the high unemployment accompanied by increasing poverty.

Jacob Zuma and Thabo Mbeki must both realize that in terms of Southern Africa, the failure of South Africa will be catastrophic, Zimbabwe, Mozambique, Namibia, Zambia as economic entities are not important, merely important in a hazy ideological sense. If South Africa fails the region can be written off for at least fifty years. This was in the mind of Thabo Mbeki who could not afford the politics of reprisals, why should Zuma be engaged in the policies of reprisals.

However, Zuma and Mbeki until his term as president is over have to realize there are really only two options open and those options should work hand in hand. There is the FDI that is needed as well as unleashing the vast potential of the African people themselves. A little humility will bring about FDI, South Africa is an important economic entity and with a little humility investors from Europe, USA, China, Japan would be willing to invest into new assets not just existing business structure.

What is meant by a little humility, a leader must learn to beg for their people, one can only do this by accepting reality, in terms of economics, South Africa needs Europe, USA, Japan, and China to invest into it, not the other way round. Zuma when sitting with these investors can not afford to make demands, they will not come, allow them to invest in non unionized business entities. Do not fight the Unions, but impress upon them that the large international investors will not pay those high wages when they can go to China, therefore the new investment need not be unionized.

Secondly it means the President of South Africa must be willing to invite these international corporations and make deals with them, for example he personally picks up a phone and calls the Chairman of Renault, Tata, Caterpillar, Sony, JVC and say, look we know you can invest anywhere you like, but try South Africa, try a small project first, see how stable the society is, so many people exist on less than a dollar a day, reality says they will accept a job that will improve their living standards, with guaranteed safety standards, pick up the phone and beg them, I promise they will not come.

More important than FDI is to allow South Africans to build. Remove hindrances that are in the way of entrepreneurs. Get rid of government businesses to South Africans not to foreign based corporations, these business where built by the South African tax payer. It is bizarre that when Margaret Thatcher sold British Assets she sold them to the British, they got first choice, by the IMF talks about selling assets first to foreign investors. Sell first to South Africans then the shareholders can sell to whomever they choose. These entities need to be sold of and be accountable to the people by forcing them to face competition. Who morally has the right to choose who competes, take the telecommunications industry, the South African government has decided who will compete with TELEKOM, these blacks will become extremely wealthy, yet it is forgotten that before 1994, no black could compete, what makes these blacks better blacks, a government connection, freedom is to let everybody enjoy that freedom, let them build telecommunication companies no matter how small they are, who is the government to say something will not be viable, let a man waste his money, let him try.

Without introducing competition, by deciding who will compete the enormous potential of the people will never be realized, they will be booing Zuma in ten years time because poverty will continue to increase if people have to beg the government to start a business. Let there be 100 mobile phone companies, the useless ones will fail.

The key thing is that knowledge can fully be realized in a free market situation. There are those who will say, look, Sweden, Canada, they have no competition as such, but it is a wholly different situation, America was once very competitive, but with time, they could afford to introduce regulation, industries where established, how can Africa regulate what does not yet exist, let it blossom then regulate it. True Canada is a serfdom, but it is a serfdom with mature industries.

It must be remembered that no society will talk of upbringing knowledge of another society, that you must do by yourself, Canadians do not want more global competition, they want to sell you their technology, they no matter what they say would want you to have better technology, remember the outcry when Japan was growing rapidly after World War 2. Knowledge is the key, but nobody will want somebody else to develop a knowledge based society. On that scale, do not expect international help, expect international help in formulating policy to allow for example Canadian mining companies to invest in South Africa. Do not on that score expect help from the IMF, World Bank or UN, the UN will have conferences on indigenous knowledge but never on how Africa must gear policies for allowing citizens to use their knowledge in building competitive industry.

Unfortunately if Jacob Zuma wants to be remembered as a success, the work ahead of him is a lot. Mbeki is a success, he has transformed the face of South African industry, that was his mandate, like it or not. For the next President, knowledge has to be respected. Gearing universities to produce research that will create industry, one can look at the works of the Institute of Knowledge Transfer, This institute shows how it is done and is fully backed by the government of Britain and Europe. It has worked, look at England, for the first time in over 100 years it will have a higher GDP per capita than the USA.

There are key industries that will be important in the future, alternative energy, come on Zuma, South Africa could be a leader, at least a contender in these industries, South African engineers can build wind turbines to generate electricity, they can build solar panels and research, they can create tidal powered stations do not look down on them like what other African countries did, Mugabe for example, he never believed blacks could do it, but he was knighted by the British establishment as having done a job well done.

Do not get this article wrong, it has nothing against COSATU, a very important organization that continues to fight dictators and dictatorial tendencies in Africa, but all I am saying is a society must look into the long run, what harm is there in a factory creating new business, unemployment is at above 35%, would it be a crime in the long run if the next president picks up the phone and say people are leaving on a US$1 a day, pay them US$3 – US$5 a day for work. When unemployment is at 5- 10% then labor can make greater demands. Otherwise they are not coming, but that is not as crucial as getting South Africa into a knowledge based economy.

I leave you with this quote, “in a highly competitive global economy will be those that can compete on high technology and intellectual strength –attracting the highest-skilled people and the companies which have the potential to innovate and to turn innovation into commercial opportunity. These are the sources of the new prosperity.” (Sir Brain Fender, Institute of Knowledge Transfer)

Bhekuzulu Khumalo

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Bhekuzulu Khumalo

I write about knowledge economics, information, liberty, and freedom