PETER ATTARD MONTALTO: If the state cannot get PR right, it cannot deliver reform

Posted in: i-Blog, Politics, South Africa on September 9, 2019

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.

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