The real danger is that South Africa might inadvertently become the Argentina of the 21st century, warned Remgro CEO Jannie Durand.
He was the guest speaker at an event of the Afrikaanse Handelsinstituut (AHi).
In 1914, Argentina stood out as the country of the future. Its economy had grown faster than America’s over the previous four decades, said Durand.
Today he describes that country as a wreck and once again at the centre of an emerging market crisis.
A steady decline
South Africa’s slipping casually into a steady decline would not be hard, Durand warned.
“Extremism is not a necessary ingredient, at least not much of it. Weak institutions, lazy dependence on a few assets and a persistent refusal to confront reality will do the trick,” said Durand.
“The only sustainable and desirable form of sovereign organisation is a government of laws, built upon thoughtful legal structures including meaningful checks and balances on unbridled power.
“Tolerance for leaders who abuse their discretion and selectively enforce the rule of law, interpret it in illogical and corrupt ways or use the law to benefit their cronies and punish those who do not play ball, is the road to ruin, autocracy and/or revolution for any democracy,” said Durand.
He pointed out that one of the essential hallmarks of an attractive investment climate is the perception and reality of a jurisdiction that respects the rule of law and has low levels of political corruption.
“When a country (Argentina comes to mind again) thinks that it can save money and create an attractive political message for its citizens by disdaining the rule of law and paying whatever it wants to pay, the typical result is that the society is ultimately impoverished to a much greater extent than any savings derived from its defiance,” said Durand.
“In addition, those citizens who were most excited by the populist flavour of their government’s lawless behaviour usually experience the greatest suffering in the aftermath.”
So what do we need?
The most important policy tool needed, according to Durand, is strong deregulation of world labour and product markets.
“Their restrictions have pushed down growth and raised unemployment for decades,” he said.
“Only substantial domestic reform – delivering freedom in the marketplace, delivering less legislation, more transparent markets, greater competition – only those policies will be the drivers of growth.”
He said the only way SA can create jobs, have fiscal repair and deliver prosperity is to improve growth everywhere, not just to a select few.
“There is a very clear message that I want to make… The more regulated the labour market, the higher the unemployment ends up being,” said Durand.
“It costs people their jobs and it means that young people in particular lose the opportunity of any job at all.”
SA needs an entrepreneurial state in contrast to a developmental state, said Durand.
“This is where the AHi can play such a great role. Support, networks, reality checks and a voice of reason, critical ingredients for an entrepreneurial culture and environment,” he said.
“Let us go and encourage the children of SA to go and build their own jobs in a country that supports an environment where our new generation of children will flourish.”