Cyril Ramaphosa chasing investors out of South Africa

Efficient Group chief economist Dawie Roodt said President Cyril Ramaphosa’s message to the world is that South Africa is not an investor-friendly country.

He referred to Ramaphosa’s comments that racist policies of the past are holding back South Africa’s economy, and that black economic empowerment (BEE) is solving this problem.

“I am surprised and taken aback when I hear that policies of black economic empowerment militate against the growth of our economy,” he said.

The President’s comments came despite South Africa’s poor economic performance over the last seventeen years and significant resistance to BEE.

The World Bank stated that BEE has imposed an excessive burden on institutions and has opened the door to corruption.

“South African policymakers have attempted, often with good intentions, to correct market or historical failures by intervening through hard regulations, such as BEE,” it said.

The World Bank noted that these interventions have created opportunities for corruption, as evidenced by the state capture hearings.

Political analyst Frans Cronje stated that taxing foreign capital upon arrival through BEE and related policies makes South Africa less attractive to international investors.

“Many companies quietly pass South Africa because their policies do not make for a good investment case,” he said.

Sakeliga said BEE has done far-reaching and lasting harm to the South African economy, adding layer upon layer of structural cost.

“Countless businesses lose bids that would otherwise provide better goods and services for public enjoyment at lower prices,” it said.

“For over two decades now, state entities in South Africa have been paying anything between 10% and 1000% extra for goods and services.”

Sakeliga said citizens should confront this fact to understand state failure in South Africa, from the collapse of municipalities, metros, and provinces to the distress of Eskom.

It said BEE’s harms might be less pronounced in the private sector, where the discipline of profit-seeking contains the fallout.

“Still, there, too, it is a burdensome drag on performance that reverberates through value chains,” it said.

“The replacement of value-directed with politically directed business inevitably comes at a heavy price.”

President Cyril Ramaphosa does not know how an economy works

Roodt told Biznews he was horrified by Ramaphosa’s comment and that the president does not know the basics about economics.

“He does not understand a modern economy, and the policies the ANC has put in place do not support growth in a modern economic environment,” he said.

He explained that a modern economy relies on services, which in turn are dependent on specialised skills and technology.

Ramaphosa’s recent comments do not align with the needs of a modern economy, its operation, or what it requires to grow.

“It sounds like the president got his economic training in the 1920s. He sounds like Karl Marx, who thinks economic growth centres around capital,” Roodt said.

“In the mind of Karl Marx, the father of communism, capital includes money, land, and labour. If you put them together, you will magically create economic growth.”

“That is not what a modern economy looks like. A modern economy centres around skills and new technology.”

He said the government’s empowerment objectives should focus on quality education and skills development, as well as creating a business-friendly environment.

“You need good quality roads, reliable electricity, good railways and trains, good infrastructure, and a safe environment to run a business,” Roodt said.

South Africa has been de-industrialising and is losing its factories because of a lack of reliable electricity, poor logistics services, and deteriorating infrastructure.

He said the lack of black economic empowerment comes from the ANC government’s poor economic policies, corruption, and incompetence.

Roodt added that the idea that increasing wealth by redistributing it through BEE is entirely misguided.

“Clearly, our president does not understand the importance and essence of a modern economy,” he said.

Cyril Ramaphosa chasing investors out of South Africa

Roodt is not optimistic that Ramaphosa and other high-profile ANC politicians will change their views and implement policies which will support economic growth.

“You are not going to change their views. They are not going to change their support for socialist and communist policies,” he said.

He stated that currently, capitalists, industrialists, skilled individuals, and wealthy individuals are leaving the country.

“What has been happening over the past fifteen years, with poor economic growth, will continue to happen until we make a U-turn,” he said.

“However, listening to the president and other politicians shows that we are a long way from that U-turn we so urgently need.”

Roodt said Ramaphosa’s message to the world was that he does not have a clue how an economy operates.

“We have been implementing the wrong macroeconomic policies for years. We are going to do more of that and double down on it,” he said.

“This is because Ramaphosa believes that if we implement more of the wrong macroeconomic policies, suddenly it will start looking better.”

He said Ramaphosa sent the message that they do not see South Africa as an investor-friendly country where political leaders understand the economy.

“They do not want to create an environment to attract investments. That is the message he sent to South Africans and the rest of the world,” he said.