Rex Column 9 May 2017
The Gigaba factor
by Cees Bruggemans words 500
Iast week I came across something striking, at least to me. Finance minister Gigaba was being interviewed at the world economic forum in Durban, and he was asked a serious question.
Either the question was poorly formulated (it wasn't) or Gigaba didn't quite get the crux of it (possibly). More likely, he choose to answer in a way that suited him and his government. It highlighted for me the lack of insight why we are not the dynamically performing economy Gigaba claims we are.
The question was about political risk, how foreign investors saw this country, and why they weren't prepared to invest on a greater scale. What kept them at bay?
Gigaba took the view that politically foreign investors had little to worry about. We may be a young democracy, and generate some unrest around elections, but the fact of the matter is that we have strong institutions, hold regular elections, that Zuma won't rule forever. Indeed, we are politically a strong country.
That certainly may all be true. But it doesn't lie at the centre of our political risk. That concerns the policies we prefer to follow, and the behaviour we are willing to condone (before the courts interfere). If we were to be following the “wrong” kind of policies, the kind that discourages growth, we eventually invite unrest and uproar. And in going down that road too many people seem to think we can only go from bad to worse.
But to say so would imply criticizing the government, its political wisdom in choosing the policies it is pursuing. And no finance minister at public forums is going to indulge in such luxuries.
Manuel didn't, Gordhan didn't and now Gigaba doesn't.
Which brings us back full circle to those watching foreign investors, and local ones, too. Are they get satisfactory answers to serious questions, or are they in great seriousness told not to worry so much. Trust us, we a a good bunch.
What I got out of this little exchange, and previous ones with other ministers, is that the real political risk isn't up for discussion. The government believes, for better or worse, that it is pursuing the right policies. The rest of us need to see the sense of that and go with the flow.
This is, of course, hardly the way of the world, at least in countries with free institutions like ours. Instead, we ask pernicky questions, the ones that expose fundamental differences in our world view.
Any sort of policy formulation that takes your fancy will not necessarily work. To get buy in, one needs to go down to a level where crucial parts of society recognise themselves. We may already far beyond this point. In other words, a common view may not be achievable, for many reasons.
But to think one can bang on about certain policy preferences, which are clearly distrusted by key elements in society, is not going to get us anywhere either. We are trapped in a long stagnation valley.
Bruggemans & Associates, Consulting Economists