PETER ATTARD MONTALTO: Seeming inaction over July unrest deters investment

Posted in: Economics, i-Blog, South Africa on November 22, 2021


This column first appeared in Business Day

I have been called out for something by someone I respect and it worried me. After the conclusion of my usual client webinar with some top fiscal experts after the medium-term budget policy statement in which we were stuck in the geekery of buoyancies and the politics of grants, said person asked why I hadn’t mentioned or quizzed my panellists on the July unrest.

I did a double-take, trying to work out how I could have made such a slip. My knee-jerk conclusion was that it was in the past and people had moved on, which worried me more.

Of course, the deep implications of July have not ended — the security upgrades and rebuilding costs, the higher insurance premiums forcing local and foreign direct investors (FDIs) to think twice. Judging by the data, the formal sector seems to be bouncing back fast, yet the informal sector seems to be ignored. There is no Covid-19 National Income Dynamics Study — Coronavirus Rapid Mobile Survey (Nids-Cram) yet for KwaZulu-Natal post-July. One suspects that, as usual, there is a deepening of poverty, with asset destruction and a widening of inequality.

Local investors and corporate clients have stopped asking about prosecutions and justice for those implicated in the July unrest — the instigators and the criminal and mafia elements who bought professional angle grinders to the ATM looting party. International investors and FDI investors survived until recently. But our regular “What’s going on?”, “Nothing” patter has clearly worn thin now.

This doesn’t mean it isn’t grating. It’s an issue ratings agencies are looking into and that still concerns investors and corporates when asked about it.

If July was a one-off event that we could say is done and dusted, then fine. But we are now moving into a year of major political tumult (postmunicipal elections coalition governance reality, ANC elective conference as well as its campaigns through the year and the policy conference). Add increasing evidence at Eskom of “passive” sabotage (ignoring a warning light and so on) and “active” sabotage (cutting cable ties and so on) now being a real possibility.

The government seems to allow these incidents to wash over it. The recent east coast port fires are a case in point in which the government has published no details about the strong possibility of sabotage. There has been only silence after an initial low-key statement.

The initial July failings were one thing — the painfully slow deployment of forces ingraining a sense of impunity. But the lack of justice being done or seen to be done is deeply problematic and shows a shocking lack of leadership. The capacity issues are only so much of an explanation — yes we know about the problems at the NPA and so on, but if the government was showing people being arrested and at least attempts to try instigators through the justice system there would be a different vibe. Instead, there is silence.

I am now in SA, seeing a broad range of investors, businesses and policymakers, and the whispered question is why this can be and what the implications are. Such a question is whispered because it is not nice to think that despite notionally such strong institutions there is a broad blanket of impunity and lack of justice hovering over our country. People are clearly torn between a blinkered view that life can carry on regardless, and the gnawing sense of something not being quite right.

Uneasy juxtaposition

This damages investment from locals as much as foreigners. As usual the government can gloss over it, the announcement of the Heineken deal being a case in point.

Wondering about the northern suburbs of Johannesburg as well as Pretoria and Cape Town after a year — but also spending some time in the townships with Breadline Africa, a charity of which I am a trustee, one gets that uneasy juxtaposition of shininess and newness, and status quo — of widening inequality — of investment and building but also of the realisation why investment as a share of GDP is at 14% under the newly rebased GDP.

A more problematic possibility emerges that is generally skirted around in the public debate — that KwaZulu-Natal must be mollified — kept on board to prevent something worse happening inside or outside the ANC through the elective conference next year and the national elections in 2024. We will see how the slates work through December 2022 and how much cotton wool is needed for the KwaZulu-Natal leadership.

Is this really sustainable politically, let alone in terms of the economy at large? One wonders if the ANC might not keep its vote share much higher elsewhere in the country by more decisively dealing with KwaZulu-Natal.

There seems to be no realisation of the damage that a situation such as that of Umgeni Water does to investor confidence. The ANC at the highest level should swiftly call out games being played as people start thinking about what the ANC losing provincial majority control in Gauteng in 2024 or nationally then or beyond looks like.

So maybe this is why I subconsciously didn’t want to talk about July on my webinar, you end up down a rather worrying rabbit hole. Matters such as those regarding Eskom start becoming more unpredictable and harder to see turning. At least Eskom’s management has been swiftly suspending people and referring issues to the police and Hawks. We all know there are issues in the criminal justice system, but things can be held together with a sense that at least maximum effort is being made.

All this points towards 2022 being a rollercoaster — even if the endpoint of a Ramaphosa re-election is often seen as a forgone conclusion, the damage in getting to that point can be real.

The lesson in all this is to not make too many assumptions that breed complacency. There are forces out there that certainly are not complacent.

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