Macro Perspectives 41 | Government-business dialogue is key

Peter Brooke, along with other industry peers, attended a meeting with Deputy President Paul Mashatile, discussing the state of South Africa's business landscape. In this podcast Peter highlights the value of government-business dialogues in improving sectors such as energy, transport, and tackling crime.

Tough times ahead, but dialogue is key.

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Chapters

• 0:52 The good news from the meeting with Paul Mashatile, Deputy President of SA
• 2:24 The bad news from the meeting around the crime news flow
• 3:42 Peter shares his biggest concern with the meeting

Transcript

Peter Brooke  00:01

Good day, I'm Peter Brooke, a Portfolio Manager at the Old Mutual Investment Group. This is Macro Perspective 41 of 2023, and I'm going to talk about a meeting I attended with Paul Mashatile, the Deputy President of South Africa.

Peter Brooke  00:13

A big perk of my job is that over time, you get to meet some really interesting people. However, after a long career of this, you realize this can be a double-edged sword. CEOs and politicians don't get to being where they are without being bright, and they can often be very charismatic, and persuasive. I've definitely found this out to my cost believing some management teams. I have a lot of respect for our team's view, which is to take no management meetings. Over time, I've refined my approach. I listen to what people say, write it down, and then check what they actually do. 

Peter Brooke  00:52

So, let's start with the good news. The first thing that impressed me was the Deputy President was there ahead of time. And in fact, it was business people arriving late that delayed the start. But the main positive is that the meeting took place, and clearly signals that government and business are talking. And there was clear evidence of this improvement in relations with the three critical work groups being on energy, transport and logistics, and crime.

Peter Brooke  01:22

My simple capitalist view remains that government shouldn't be in the energy or transport business. So, I was delighted to hear that the impediments are spitting out the critical transmissions business into a separate entity are being worked through. This will enable the private sector to do the delivery of energy, and then the transmission company to take it through. Having seen Anglo's announced job cuts this week at Kumba Iron Ore due to their inability to ship iron ore, shows the cost of Transnet's decline. This is a growing crisis, which is heading towards a train wreck. So, any progress in the transport and logistics area would be welcomed. And it definitely appeared clear to me that the ANC has become much more pragmatic on the philosophical debate about what the government can and should do.

Peter Brooke  02:24

Let's move on to the bad news. Roughly half the questions from business were self-interested and is basically lobbying. As business, we are quick to criticize government, but business didn't exactly carry itself in glory in the state capture years. Another area of bad news was the news flow around crime. The government business working group here is much less advanced, and there are much less concrete plans. And I think it's also harder, because this is an area that the state should naturally be dominant, and leading. The response from the Deputy President around organized crime was light, and more of the same is not going to make things better. Nor is the SAPS obsession with more boots on the ground. We can't spend our way out of this problem, particularly as we go into medium-term budget policy process with deteriorating fiscal dynamics. Mining cash flows have collapsed. And the corporate tax take is under immense pressure, meaning the government has to prioritize its expenditure. There's going to be some really tough negotiations, particularly ahead of an election year next year.

Peter Brooke  03:42

And this leads me to my biggest concern with the meeting. The Deputy President made a throwaway line about South Africa being rich, as we have all these resources in the ground. While SA believes this, we will not live up to our potential. Firstly, the goose that laid the golden eggs for South Africa, mining, is in serious decline. But secondly, people who think they're rich don't work as high as they should. The true value of South Africa lies in its people, and until we develop this resource, we will remain stuck in the past. I hope you enjoyed this perspective. I'm away next week at my coaching course at INSEAD, so there'll be a delay till the next podcast. Thanks.