Even though government now realises how poorly positioned the economy is, it remains hamstrung in trying to turn things around, says Intellidex’s Peter Attard Montalto. Featured in Business Tech

This column was first published in Business Day

The multi-decade low business confidence reading last week, which came out at 21 out of 100 (50 indicates a neutral outlook for the RMB/BER index) was shocking.

It is the lowest since the 1998 emerging markets crisis, when interest rates hit 25.5%. It was worse than the global financial crisis in 2009 when the economy shrank for three quarters.

Next we will be hearing again about an “investment strike” — a term frequently used by some to accuse business of trying to sabotage the economy (most recently SA Communist Party general secretary Blade Nzimande in a speech in August).

The sense of “strike” seems to be in a Star Wars rather than labour sense, an attack rather than a withdrawal, even though the latter is what actually happens. With businesses this pessimistic about the future of the country, they are not going to be taking scarce capital and putting it at risk to expand operations. There is no intention to undermine the economy — it is a reaction, a return to the barracks, a view that the risks of an advance are too great.

President Cyril Ramaphosa has made much of an investment drive to attract investors. He has appointed eminent emissaries to engage with the world and held big conferences, with one last October raising R290bn in pledges. But the real problem is domestic investment at the macro level, by which I mean the environment has to be fostered for millions of decisionmakers to choose expansive, growth-inducing investment rather than risk defensiveness.

The decision to put money into local bricks and mortar requires higher credence in the economy being able to deliver a return. One cannot use the strategy deployed so far — of getting business leaders together and obtaining promises to invest and then phoning and harassing them about whether they have done it. A macro strategy permits no promises or phone calls. It requires inducing investment decisions solely because millions of people believe it is in their own best interest to invest. That it will deliver higher returns than the alternatives.

It needs to be the fixed kind that goes into building factories and buying machines to enable potential output to grow rather than the portfolio kind that goes into JSE-listed companies. Portfolio investment can rely on corporate management to shift exposures to foreign higher-growth markets or to sell commodities that earn hard currency, so listed companies can do just fine while the domestic economy withers. On its own, it does little to increase economic capacity.

Of course, I should hasten to point out that the figures don’t reveal this absence of investment yet. Private-sector investment spending has actually been higher than government’s and state-owned enterprises’ for a few years (which was always the irony whenever someone delivered the “investment strike” accusation at business). But it has dipped the past two quarters.

Corporate credit also provides an indication — the rate of growth of lending to companies has been drifting downward since 2015. But that business confidence figure is a leading indicator. You can be sure the actual investment numbers will start to reflect negative decisions soon.

Investment decisions are about two things: projected returns and risk. The government has a lot to do with both, though it is the latter that is easier. The government has within its power the ability to offer regulatory certainty. And, despite promises, regulatory certainty has been scarce.

The mining charter, digital migration, visa rules, Eskom resolution, energy policy and so on are still dragging on after promises they will be dealt with swiftly. Instead, the big policy moves that have been made have been negative.

National Health Insurance (NHI), for instance, offers a Brexitesque level of uncertainty set to drag on for years as attempts are made to ram into existence a fiscally impossible policy. The Credit Amendment Act signed into law by the president two weeks ago risks creating permanent uncertainty about the security of lending at the lower end of the market. It is hard to point to one single actually delivered policy that is good for business.

Projected returns can be helped by improving the environment in which businesses operate. Filling in a form is a cost. Filling in many, for everything from getting a BEE certificate (relatively easy) to workman’s compensation registrations (oh boy), adds up to a lot. That burden affects small business most because it is largely a fixed cost which big business can average out. While we pay lip service about stimulating small business, slashing red tape is a simple way to promote the chances of small business success relative to large businesses.

None of this will be news to the presidency. There are good ideas and policies being developed there. The National Treasury’s economic policy paper is another set of good ideas that makes the same points about red tape and policy certainty. Our problem is the implementation. So far there are no implemented and reliable policies that business decisionmakers can see that will shift their return/risk expectations positively.

The president has had a good week in response to xenophobic violence and violence against women, speaking out and publicly. He has shown some leadership (though there have been demands for more on that front).

Now we need some of that spirit directed at interventions that will help businesses to renew their faith in the future.

  • Theobald is chairman of Intellidex.

Intellidex is recruiting an experienced researcher and writer to join our dynamic research team in a mid-level position. The appropriate person will support Intellidex’s political economy researchers to produce reports for clients and for public consumption.

The idea candidate should have:

The role will involve research to develop appropriate policy recommendations for clients in both the public and private sectors. It will involve occasional meetings with clients and maintaining a network of relationships to obtain insight into current policy debates.

Intellidex offers a unique environment that draws together top academic skills, financial markets research and insight on South Africa’s policy development. We work with financial institutions and companies, as well as domestic and international policy-makers to improve outcomes for all South Africans. Intellidex is well-recognised for high quality research and you will become a core part of a highly skilled team, providing significant learning opportunities to advance your career.

Performance will be judged by the delivery of high quality research projects and reports, as well as engagement with clients and other audiences. We have offices in Sandton, where this position will be based, London and Boston. The position will report to the global head of capital markets research.

We offer a small company environment in which you will have considerable latitude to shape your role. Remuneration will be a mixture of basic (in the mid-level researcher range) and performance-based pay.

Our standards are high. You will be working with MBAs, CFA charterholders and PhDs on our team to ensure that Intellidex delivers high levels of client satisfaction and responds dynamically to new business opportunities.

If you are interested in the position, please send a covering letter in which you address the seven requirements listed above using the form below. Deadline for applications is 20 September 2019.


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The mandate of the PIC Commission is not just to make sense of what’s been going on but also to craft a vision of how the PIC should be run in future, says Intellidex’s chairperson Stuart Theobald. Listen to the full discussion on Classic FM:

Treasury’s proposal to sell Eskom’s coal power stations is more of a political baseball bat to end the torpor in government because there would be no buyers, says Intellidex’s Peter Attard Montalto. Featured in Financial Times

PR seems to be getting worse not better and this is reinforcing an excess patience on reforms

This column was first published in Business Day

I like nothing more than discussing grand ideas with people with their hands on the levers of power. At heart I love systems and understand what makes them tick and how they become broken and can be fixed. (While typing this I sit here in Cape Town after the World Economic Forum with a broken laptop hinge and some epoxy resin trying to glue it back together.)

Political economy systems work on very simple interconnecting drivers, like lines of code. The problem in SA is that one of these lines of code says “IF IN DOUBT WAIT”.

Politicians are far too patient. Risk aversion combined with underlying patience is a toxic mix. As I have often said before, we need a bit of panic and hands in the air, which fundamentally is the opposite of patience.

‘Lines to take’ documents are often pilloried but are how well-functioning political systems work

Clever politicians can balance a risk aversion to undertake action (or reform) with effective public relations (PR). This is the art of the politician that they are meant to be so effective at.

However, the past weeks have shown the fundamental inability of this administration to do PR effectively on the issues of sexual violence and xenophobic violence. A well-functioning reform system is unlikely if the state doesn’t have a handle on PR.

Maybe that is unfair, but with sentiment at rock bottom and business unwilling to give the benefit of the doubt upfront, these kind of parallels are likely to occur.

A well-functioning Union Buildings on either PR or reform would be able to push down directives, deploy political capital and demand accountability with information flowing back upwards.

When there is a crisis of violence there should be the obvious deployment of control from above on communications, standard responses and wordings agreed to use and avoid. This should be drummed into public servants and politicians in the media. “Lines to take” documents are often pilloried but are how well-functioning political systems work.

One would have thought this would be the case in a country where rape, femicide and xenophobic violence are depressingly and outrageously common. But no.

Negative effect

I think the government underestimates the negative effect this has on investors and business. This was brought home to me in the past week when two separate foreign investors saw problematic PR in the mainstream foreign media. In the case of the sexual violence it was the Government Communication Information System tweet that effectively blamed women. And then there was the media conference video of the deputy minister of police, whose knee-jerk reaction was to question the concentration of foreigners in certain areas. Both had similar responses from investors: “what the hell?!”.

Business can show patience (and survival) through hibernation. This is what growth of 0.6% this year is ultimately all about. A private sector that is ticking over in a minimally sufficient form ready to do more but unable to with the set of current and expected business conditions.

Hence we can have a bubbling up of pent-up demand after load-shedding in quarter two with growth of 3.1% quarter on quarter, but then underlying growth weakness will show in quarter three as that falls back fast towards 1%. This shows the underlying robustness of the private sector to survive but then reveals deeper problems, such as the growth in quarter two being jobless, with the large jump in unemployment to 29%.

The government sometimes characterises business as happy in this hibernation mode, but I think this is totally untrue. Companies want to expand and generate more business. The private sector does not like the feeling that comes with misallocation of resources and capital.

Hence pressure is meaningfully increasing on this administration on a wider range of fronts. PR seems to be getting worse not better, and this is reinforcing excess patience on reforms. This is a completely unsustainable political situation as much as it is an economic crisis or anything else.

The system will break to something new. The question is what.

At the moment a general policy narrative is either “do nothing”, or “endlessly socially compact” or “just keep talking” — that is, a surfeit of patience.

In a new system there needs to be an understanding that leadership is about deploying compacts that are already balanced and having the ability to get buy-in without endless consultation and religious-level observance of Nedlac; targeted deployment of political capital and then an ability to manage both policy and PR through the system.

Such a system, however, needs to understand the fundamental flaw of the existing social compacting religion: that there is no first-mover catalyst. This is what the government has to do to deal with the necessary preconditionality that business (and social partners) have before they can come to the party. Such a first-mover problem is deeply entwined with the excess of patience.

For instance, how can business agree to come to the fourth industrial revolution party without the necessary skills, which requires visas as a precondition. This is the root problem of Thuma Mina social compacting: it is a large single step forwards that “society” takes in one go. Instead, the reality is a set of key interdependencies that require sequencing and that someone goes first.

In an environment of a trust deficit and zero benefit of the doubt, for the government to play its role will require leadership and an ability to manage the state — getting the building block of PR right first.

• Attard Montalto is head of capital markets research at Intellidex.

Negative sentiment is quite rational because of the lack of change in SA, says Peter Attard Montalto, Intellidex’s head of capital markets research. Listen to the full interview with Bruce Whitfield on Radio 702

Intellidex would like to appoint a senior part-time bookkeeper to work one day per week.

The ideal candidate would:

1. Have considerable experience in bookkeeping at a multinational company working in multiple currencies, preferably with experience of SA, USA and UK companies including differing tax requirements.

2. Be experienced in Sage and Quickbooks online.

3. Be willing to work for one day per week (which could be split into two half days) based at our offices in Sandton

Duties will be to support our fulltime accounts manager to ensure appropriate intercompany accounts are maintained and that the statutory accountants in each jurisdiction are fully supported in tax filings and creation of annual financial statements.

The role would suit a retiree or someone with a portfolio of bookkeeping responsibilities.

The role would be based at our offices in Sandton.

If you are interested in the position, please send a covering letter in which you address the three requirements listed above and CV with references to jobs@intellidex.co.za or complete the form below. Deadline for applications is 20 September 2019.

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The PIC can commit to social and corporate governance and social impact investing by bailing out state entities – but only if the sacrifice of financial returns can be justified in terms of the public benefit, Intellidex argues. Featured in Daily Maverick

We are recruiting a manager for our philanthropy research and consulting practice to fill a position that has become vacant.

Over the last few years, Intellidex has developed a thriving research capability in analysing foundations and other institutions in the non-profit sector. Our evidence-based approach enables us to advise foundations on overall strategy. In addition, along with our investment research team, our philanthropy practice supports research and consulting on impact investing including investment strategies and analysis of impact investment opportunities.

The ideal candidate should have:

  1. A graduate degree in a social science field with some bearing on the non-profit sector. A master’s degree or above is preferred.
  2. Experience at a senior level either in a foundation or similar non-profit, or in a service provider to the non-profit sector.
  3. Experience engaging directly with clients and evidence of ability to manage productive and mutually beneficial relationships
  4. Examples of written research reports based on original primary research such as surveys or interviews of respondents.
  5. Experience in managing complex research projects and overseeing teams working on them.
  6. Highly organised and experienced in Microsoft Office software.

The role will involve supervising original primary research on non-profits and ESG investing, working with our primary market research team and other experts at Intellidex. It involves analysing information collected and writing reports providing detailed insight into the data. Occasionally it requires presentations of report results to clients and the public at large.

Intellidex offers a unique environment that draws together top academic skills, financial markets research and insight on South Africa’s policy development. Our philanthropy practice aims to maximise the impact of the non-profit sector, just as other parts of our business work with financial institutions and policy-makers to improve outcomes for all South Africans. Intellidex is well recognised for high quality research and you will become a core part of a highly skilled team, providing significant learning opportunities to advance your career.

Performance will be judged by the delivery of high quality research projects and reports, as well as engagement with clients and other audiences. You will also share responsibility to attract business for the philanthropy practice. We have offices in Sandton, where this position will be based, London and Boston. The position will report to the global head of strategy research.

We offer a small company environment in which you will have considerable latitude to shape your role. Remuneration will be a mixture of basic and performance-based pay.

Our standards are high. You will be working with MBAs, CFA charterholders and PhDs on our team to ensure that Intellidex delivers high levels of client satisfaction and responds dynamically to new business opportunities.

If you are interested in the position, please submit a covering letter in which you address the six requirements listed above and CV using the form below. Deadline for applications is 20 September 2019.

Stay in touch with Intellidex.

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