Happy Days are here again
Listening to President Matamela Cyril Ramaphosa announcing his new team of special investment envoys with a plan to raise around $100 billion over the next five years by travelling the globe and selling the South African story of openness and opportunity to potential investors reminded one of the lyrics to American Jazz Age (an era wonderfully captured in F. Scott Fitzgerald’s timeless novel, The Great Gatsby) singer Annette Hanshaw’s song Happy Days are Here Again, “Happy days are here again, The skies above are clear again , Let us sing a song of cheer again, Happy days are here again, Altogether shout it now, There's no one who can doubt it now, So let's tell the world about it now, Happy days are here again…”
President Ramaphosa’s “New Dawn” is upon us and we have entered into an “age of opportunity” as a nation. The doom and gloom of the Zuma years appears to be aeons of years behind us. Such nebulous, subjective concepts as business confidence, consumer confidence and political risk seem to all of a sudden be working in our favour, totally contrary to what we witnessed in the previous decade under the leadership of President Zuma.
There is a renewed positivity and hype around South Africa and the South African story, with a leading global investment bank having recently tipped South Africa to be the leading “emerging market story (economically) of 2018.” The economy is tipped to grow at a higher rate than had previously been anticipated; the President himself declared this to be the “year of the job” as the country continues to fight to overcome unacceptably high levels of unemployment and inequality.
So this is the message that our new special investment envoys will be conveying as they traverse the globe and various corners of South Africa in pursuit of the highly sought after foreign and domestic direct investment. The wonderful part of the story is also that big business appears to be on board and we are seemingly well on course to turning our economic fortunes around and overcoming the much talked about investment strike by the private sector.
Anyone who loves this country and wants us to overcome all our demons and become the South Africa of “opportunity and plenty” would of course celebrate all this and put their hands on deck to contribute positively to this much needed turnaround. But alas, what if big business itself is part of the problem with the South African economic story, as it stands today before this much desired turnaround?
A 2016 University of Johannesburg Centre for Competition, Regulation and Economic Development (CCRED) study titled, “An Agenda for Opening up the South African Economy: Lessons from Studies of Barriers to Entry” by Professor Simon Roberts tells us that a large part of the problem with the South African economy is that across various sectors it is dominated by a monopoly of a few small firms which control entire value chains and have market power which enables them to control the terms of trade.
This uncompetitive behaviour by these few large firms has the net effect of preventing the entry and growth of small businesses in the South African market. This is a serious impediment to inclusive economic growth because it is small businesses that provide the innovation and impetus that grows an economy and creates much needed jobs. It stifles investment, innovation and initiative within the economy because the few big players are able to keep new entrants and other small businesses from growing in order to protect their market share and dominant positions.
Whilst this may be of huge benefit to the shareholders and owners of these few big corporates, it works against the developmental objectives of the country and proves once again as the report clearly highlights that markets are innately imperfect and incapable of self-correcting, contrary to what those who subscribe to the the Classical school of economics would have us believe.
So, there is a point to which big business in its search for profits (often super profits owing to their dominant market position) ends up also scuppering the growth and job creating potential of our economy. The solution of course is to open up the South African market and make it more competitive, meaning that these big monopolies must be broken up in order to allow small businesses and entrepreneurs to flourish.
Our Competition Commission must have more teeth, not just to fine big players for uncompetitive behaviour, but also to break them up with the aim of creating more inclusive, equitable growth. We need to create an economy where ease of entry is sacrosanct and big business is enticed(or forced) to open up value chains so that we can win the battle against unemployment and inequality and truly enter into this “New Dawn” that President Ramaphosa is leading us towards. After all, as the UJ CCRED report reminds us, the NDP states that one of the main problems with the phenomenon of highly concentrated industries that have limited competition is that they produce little (if any) efficiency gains within an economy.
In the end, we should have a both-and (as opposed to either-or) approach to this issue. We need big business to invest more in our economy and initiatives such as government’s InvestSA one-stop shop and the appointment of special investment envoys should be celebrated in this regard, but the other big favour that patriotic South African corporates can do for us, is to open up the value chain, open up markets and give or create opportunities for small players to come in so that we can indeed grow the economy, create jobs and address the income and asset inequality that stubbornly remains an albatross around our necks as a nation.
Mugabe Ratshikuni works for the Gauteng provincial government; He is an activist with a passion for social justice and transformation. He writes here in his personal capacity.