Page 49 - IRMSA Risk Report 2020

EXPERT OPINION

CHANDU K ASHIRAM
PRINCIPAL ASSOCIATE, LUCIDUM

Impediments that prevent SA. from dealing with this risk effectively:
• POLITICAL: ANC political ideology and populism mean that enabling the legislation
required to address health (through the NHI) or land reform is not market friendly –
negatively impacting business sentiment and investor confidence. Our labour laws
have long been a deterrent to foreign direct investment;
• BUSINESS: Lack of/slow transformation efforts have led to increased/more onerous
legislation in the areas of employment equity and black economic empowerment;
• LABOUR: Stringent labour laws were necessary to protect the disenfranchised and
indigent following decades under the apartheid regime. Labour law reforms that
find a way to protect employees and encourage investment have been lacking;
• SOCIAL: Inequality necessitates legislation to transform the economy, which is still
largely run by the white minority. Despite industry charters in the energy, mining,
banking, etc. sectors, we have not achieved real and sustainable transformation;
• JUSTICE SYSTEM: The justice system is overloaded, slow, and plagued with pockets
of corruption. This makes it difficult for the layperson to rely on the law to enforce
their rights – be it labour, contractual, or basic service delivery. SA takes an average
• of 600 days to enforce a contract. The inability to enforce basic service delivery rights has led to significant increases in service delivery protests.
Damage to public property has also increased dramatically; and
• CORRUPTION: The status quo of corruption still largely prevails despite the presence of our new President. Deeply entrenched factions are holding
on to the “ten-year-old golden goose” at the expense of economic growth and prosperity for all. Are the Commissions just “talk shows” with no
consequences? Have some of the Chapter 9 Institutions been captured or re-captured?

Key interventions to effectively address this risk going forward:
• New legislation and amendments to existing legislation must consider impacts on the economy whilst addressing social imbalances;
• A specific SMME legislation strategy needs to be developed to incentivise the growth of SMMEs and bring the informal sector into the fold (to
increase the tax base and revenue collection);
• Home Affairs needs to find ways to address visa issues and to legitimise the large number of foreigners in SA and bring them into the formal
economy;
• The justice system needs to be streamlined to assist the layperson;
• Establishment of a specialist Chapter 9 Institute, properly resourced (in both skills and money), to deal decisively with prosecutions related to State
Capture, fraud and corruption.

TIM COHEN
BUSINESS EDITOR, DAILY MAVERICK

At the time of writing, the South African Government had just published the draft Constitution Eighteenth Amendment Bill, to allow for the expropriation
of land without compensation, for public review. Continued legislative and regulatory changes such as this create the risk of the public becoming cautious
about where the country is headed. Such changes also cause the investment confidence of international stakeholders to suffer due to uncertainty. This
is especially apparent when Government communicates its intentions without providing details on how it means to achieve them or the scope of their
impact. At this point in time, this specific risk is getting worse. In the case of State-owned enterprises, for example, there is the definite intention to
address problems but no conclusive plans on what to do. Will we scrap South African Airways, or will we not? The Government is not saying and that
breeds the perception that it is flying by the seat of its pants. Government is aware of the effects of new legislation on individuals, such as farmers in the
case of the land expropriation bill.
But it seems ignorant of the wider impact on positive sentiment, both inside the country and internationally.
One of SA’s key impediments to dealing with this risk effectively is that the Government does
not have convincing arguments to back up its proposals. These are needed to maintain or
win the support of its voters, other parties, and the global community.
As there are so many variables to consider, it is difficult to determine the key indicators of how
this risk might play out. Notable indicators include the state of the Rand; the rising ten-year
bond yield; and our investment grade being under constant threat from rating agencies.

To address this risk going forward, a key intervention would be for the Government to be very
specific about the extent of new policies, so that all stakeholders are clear about what exactly
will happen. Otherwise, the rumour mill will just make the problem worse.
At this stage there are no specific entities (public, private, civil society) that deal particularly
well with this risk. I do think it is the President who must promote new policies by explaining
them well and reassuring the public by being specific about the intended outcome.

In closing, SA can increase its risk resilience through Government’s clear communication.
Taking property rights as an example again, Government can make it clear that the
amendment to the Constitution is for isolated cases and that it will not be permitted to go
any further.
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