South African Institute for Race Relations Centre for Risk Analysis prsentation summary points [Part 2]

Summary

• The blog summarises the question time after Cronje's speech
• Unduly heavy regulation of the RSA market, in the absence of a skilled population, will conclude in structural unemployment
• Investment will be dampened if the RSA government go through with distributing land ownership. Often when land is taken, rights follow.
• There are xenophobic attacks and killings of black foreign workers. Often these are entrepreneurs from other African countries.
• Severe lack of capital for investment between governments and investors due to lack of current investment.
• Three things are needed to help RSA: Increase choice of schools, deregulate labor market, remove race quotas.
• Continual attacks on the middle class and foreign investors will increase emigration of skilled workers.

Introduction
In this second part of this topic, questions answered by Cronje will be summarised in this blog.

This blog post is a two part summary of a report given by the South African Institute for Race Relations Center for Risk Analysis at the CATO institute in Washington D.C., United states in 2015. The first part will summarise the presentation. The second part will summarise the question time after the presentation. Points of analysis will be added.

Link 1 is the link to the PowerPoint presentation that was given during the conference. Link 2 is the link to the full presentation on YouTube.

Link 1
https://object.cato.org/sites/cato.org/files/articles/outlook-2015-south-africa-world.pdf

Link 2

Employment Regulations

• Unduly heavy regulation of the RSA market, in the absence of a skilled population, will conclude in structural unemployment.
• RSA need to deregulate the market to at least allow young RSA a chance of a job. Because this is not being done people are turning to Marxist parties
  -- Analysis: The unemployed will turn to leftist parties if they feel a loss of hope in a system that does not allow for them to get a job or be looked after.

Property Rights

• The current RSA government has plans to legislate seizure of land off mainly white South Africans.
• This will severely dampen investment.
  -- Analysis: Invasion of property rights, in most cases, has led to an invasion of human rights (Eg. Zimbabwe attack on white farmers from 1980, attacks and enslavement of native Americans in North America during the 1700s and 1800s, invasion of Cossacks into Siberian lands in the 1800s). Investor confidence diminishes, since what stops a government from taking their land after they take someone elses?

Foreign Workers

• Xenophobic attacks and killings of black foreign workers. Often these are entrepreneurs from other African countries.
• These primarily occur due to certain people in the government and Zuma household promoting the idea foreigners are taking RSA jobs, opportunities and in some cases women. The tactic is to say “foreigners are in the way of your success, and if this person was not in the way you would be successful”.
  -- Analysis: This leads to xenophobia, and anti-foreigner sentiment. Overtime, if this idea is cemented to enough people in the country, it may be very hard to allow for any expansion of foreign investment in RSA to occur.
• This tactic is a scapegoat
  -- Analysis: You can see this with Zimbabwe and Venezuela, as they push and blame outside influence to divert attention towards their governments.

Could RSA do what Indonesia did?

• Indonesia undertook a Narrow Road solution, where they focused on market driven economic reform and erosion of democratic institutions. This staved off Marxist from taking over the Indonesian government.
• In this scenario, if RSA takes this path, they must maintain property rights of citizens and investors, but tolerant no descent at all. Elements of this have started to emerge with the government attacks on EFF and increase in riot police.
  -- Analysis: The start of the video showed this happening to EFF members of parliament
• Property right are needed to get to investor lead growth in any country.

Coalition government

• Main coalition in 2024 would be ANC and EFF if ANC loses its majority.
• This completes a circle. The EFF was originally youth wing of ANC and expelled due to their radical ideas. They survived due to exploitation of unmet ideas and successes for those people who are looking for hope.

BRICKS influence

• Diplomatic pressure of China, if influencing RSA will severely limit US involvement due to the anti-corruption act in the US.

Public – Privat partnership

• Currently, due to a severe lack of investment in RSA, agreements like this need to ask the question where is the capital going to come from.
• Public – private partnership can open the door to a corrupt relationship between a corrupt government and investors.
• Public – private partnership can only work if an investment environment is created and investors open the door to it
  -- Analysis: Investors need to initiate the willingness for the government to work with them, not the other way around.

Specific solutions to RSA problems

• It does not matter who is in power, Cronje (2015) said he would back any party willing to embrace the reforms needed to grow RSA.
• ANC can do this, but it will be much harder if they have to share power with the EFF.
• Three major reform that will substantially help RSA economically are outlined as follows.

1. Increase the type of schools available for students to learn different skills and for their parents to send them to (Eg. Carpentary, engineering, law firms).
2. Significantly deregulate the labor market. Three things to do: remove minimum wage, include a right to work clause in RSA constitution, and scrap bargaining of consul agreements,
   -- Analysis: Note that a constitutional majority will be needed to include a right to work clause in RSA constitution. This means the ruling party will need a 66% majority of seats in parliament.
3. Remove all race based and black empowerment policies. These are breeding ground for corruption and incompetence and unnecessary obstacles for investor lead growth.

Engage economic competent people in government

• Cronje (2015) has seen more positive interaction between the ruling party in the RSA and investors more now than in than any point the last 20 years.
• However, RSA is currently underperforming significantly.

Emigration of Skilled Workers

• This increased from 1994, but stopped in 2009. Cronje (2015) mentioned this would continue if domestic policy remains hostile after the recovery.
• Pressure of attacks on foreigners and anti-white middle class sentiment (Discussed in the Foreign Workers section) will further increase emigration of the middle class, skilled people and foreign entrepreneurs.
• Cronje and his company are still in RSA because they want it to be a success. Upside scenarios remain in reach. They do not want to die, as an independent think tank, knowing what would have been if they committed every resource to ensuring reform happened.
• There are a lot of willing entrepreneurs, but too much regulation is stopping entrepreneurship from happening. It is about repealing the numerous laws that are in the legal system.

China model

• Narrow road scenario. RSA is economically better off, but the right that SA fought for during apartheid would disappear.

Future outlook from investment

• Africa will no longer be labelled as the hopeless continent, given the way Africa is going. As opposed to 20 years ago when it was seen as the poor continent.
• There is a danger as the wealth of a country increases, the political elite will start to extract that wealth for themselves (eg. What Mugabe did to grabbing white farmer’s land). If this happened, it allows for business and government to interact in a semi-corrupt fashion to secure short term economic goals between investors and governments.
• There is also a danger of running the risk of governments becoming more authoritarian. RSA becomes less democratic and does not have environment for long term investment as a result.

Have a nice day.

Sources
Cronje 2015, 'The Time Traveller Scenarios: South Africa's next 10 years, South African Institute for Race Relations Centre for Risk Analysis, retrieved 29 June 2017, https://object.cato.org/sites/cato.org/files/articles/outlook-2015-south-africa-world.pdf.

Diagonal Views 2015, 'Every South African Needs To Watch This - Scenario Expert Discusses South Africa's Future', CATO Institute, YouTube, retrieved 29 June 2017, www.youtube.com/watch?v=etpWnbqBc5I