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Unrest in SA (and around the globe) shows need for sustainable investment 

When a ‘business as usual’ approach won’t work.
Image: REUTERS/Siphiwe Sibeko

With the dust now apparently settled on the most widespread and violent period of intense unrest in South Africa’s post-democratic history, businesses are looking to rebuild and investors are assessing their options. As they do so, one thing that should be abundantly clear is that a “business as usual” approach won’t work.

Forget the motives of those who instigated the violence and looting for a moment. Instead, remember that they were able to tap into the deep-seated anger of the country’s poorest people. While opportunistic middle-class looters make for great headlines, there’s little doubt that they were in the minority. Fuelled by the economic devastation of Covid-19, South Africa’s unemployment rate is at an all time high of 32.60%. The country also remains one of the most unequal countries on the planet, a situation that has long been described as a ticking time bomb.

As such, any rebuilding efforts shouldn’t look to entrench the status quo. Policymakers, entrepreneurs, and investors alike should all look for new ways of doing things that benefit the majority of South Africans.

Easing conditions for entrepreneurs

For policymakers, a good place to start would be to make life easier for entrepreneurs. According to the World Bank, South Africa ranks 84th in ease of doing business. That puts it behind countries such as Albania, Mongolia, and Kyrgyz Republic. With due respect to those countries, it’s not the kind of company Africa’s most industrialised economy should be keeping. It also takes an average of 40 days to start a business in South Africa. By comparison, it takes a single day in New Zealand, which unsurprisingly ranks first in the ease of doing business index.

While there’s no doubt that the excesses of big corporations need to be curbed through regulation, there’s clearly a lot of red tape that South Africa needs to cut in order to foster entrepreneurship. The country has shown that it’s capable of producing startups that can scale and compete internationally. Imagine how many more it could produce if conditions were made a little easier.

We also know that new jobs are created by SMEs and not big corporations. Government support for SMEs and the implementation of conducive policies for businesses must, therefore, be a priority.

It’s not just regulation directly related to entrepreneurship that needs to be reformed either. For example, the power outages caused by years of mismanagement at Eskom haven’t only hampered the ability of existing businesses to operate, but have harmed the country’s investment potential. While the increase of the embedded generation threshold to 100MW is a positive step, it’s just one of many small steps that the government could take to make economic growth and job creation easier.

Read: Is this Ramaphosa’s most decisive economic decision since taking office?

Another important step is to fix education. We need to think differently about how we get the youth into the workforce and provide them with the skills they need to compete in the contemporary global economy. Fixing education will take time, but it’s well worth the effort in the long run.

Beyond extraction

At the same time, businesses and investors have to reconsider how they operate in South Africa. Over the past year or so, the country has experienced trade surpluses, thanks to bumper crops in the agricultural sector and a commodities boom. But these sectors can only create so many jobs. Most of the money from these sectors also comes from the export of raw products and materials. If South Africa were to refine its natural resources, it would create products with higher value and bring more jobs into the country.

Those businesses that do exist in the secondary and tertiary sectors should also ensure that they do everything they can to ensure their businesses operate sustainably and support the communities around them. The United Nations’ Sustainable Development Goals (SDGs) are a good place to start on this front.

Adopted in 2015, the SDGs are a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. When it comes to achieving those goals, the UN calls on businesses to play their part too.

While there are those in the business world who’ll argue that taking an SDG-focused approach presents unnecessary obstacles, we believe that it can provide stronger businesses, economies and societies. Businesses can only gain by better serving and supporting the communities they operate in and by taking a long term view informed by sustainability.

Investors, meanwhile, should look beyond opportunities for short-term gain and focus on companies with long-term viability that operate sustainably. While they may be cautious for the moment, it’s important to realise that there are major opportunities to be found, especially among the companies that service the communities most adversely impacted by the looting.

Positive change can (and must) happen

With or without the support of the government, there can be no doubt that South Africa’s recent unrest represents an imperative for change. By embracing that change, it’s possible to build back better and more inclusively.

Without it, some may just try to maintain the status quo and put a lid on some of the factors that led to the violence in the first place. At best that’s a temporary fix. That’s true even in developed economies. In 2011, areas of London were rocked by riots that caused hundreds of millions of pounds worth of damage. Today, people are warning that conditions are again ripe for rioting. In South Africa, it’s highly unlikely that it’ll take that long.

Ultimately, the only way to change the status quo is through jobs. That doesn’t just result in the upliftment of those who are employed, but also those they support and the money velocity added to the economy that becomes the fuel for growth.

We must act now and act decisively.

Bryan Turner is partner SPEAR Capital.

COMMENTS   12

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There can be no sustainability if a large percentage of your population do not want to work and will only vote for a living.

Sustainable investment so they got something to loot and burn down again?
How sustainable is that?

Without tacking the US Dollar hegemony out of play then it will be ‘business as usual’.

Using the fiat currencies, printed without abandon, as gambling chips, is the problem.

Currencies need to backed by something.

I don’t think people understand they simply yet profound comment you have made. Well Said by the way.

Fiat is back by promises and nothing more, they are printed at the same production rate which politicians lie. This poor form of monetary policy (Modern Monetary Theory) has let to the dilution of real value and can easily be seen in the inflation numbers.

Normally, Inflation will only occur when a product has been technologically improved and or the material which are used have had a scarcity causing the price to inflate however after sometime, the market would generate new businesses who manufacture the newly improved product and the price would deflate.

In comes MMT and all we see is inflation or better put value deflation, which is why every year the average joe who earns the same as the previous year can purchase less.

The value of the US dollar has been inflation by over 554.68% in the last 50 years
https://www.inflationtool.com/us-dollar/1971-to-present-value

Last year alone 20% of all US Dollars were printed in a single year, to what benifit. Dedollarisation is happening because the US is diluting its own value, when the world wakes up we will be in a hyperinflation period until a new global trade currency is created and issued by the IMF.

A looter is a looter and remains a looter!!!

NO EXCUSE!!!!

If these poor looters were so desperate why is it necessary to have millions of foreigners (most undocumented) in SA to run small businesses? MILLIONS!!!!!

It shows that ease of business etc. has nothing to do with the state of the poor looters.

The anc has destroyed the people. They can do nothing but “struggle” complain, beg, burn and loot!! They take after their anc leadership that does exactly the same!

In SA when things go wrong the anc and its people look for an excuse to justify their actions.

Wake up and fix yourself and fix your people. This culture will get you nowhere except the gutter. As for changing the culture?? Good luck!!

Political instability is created by the anc and don’t expect to get a risk premium on your investment in SA. You wont. It will be looted.

Bitcoin is safer.

You are vehemently correct sir.

No sensible entrepreneur will take risks, and invest capital, time, and effort with the sole aim of providing employment opportunities. Such an unproductive scheme will be a gravitational black hole that consumes capital. The aim of a business is to produce widgets, not jobs.

The narrow-minded and ignorant socialist politicians and labour unions focus on benefits and privileges, rather than on contributions and value-adding. This attitude is destructive and leads to unemployment. The focus should be turned to contribute something to the business, and not to extract something from the business. The salary or wage is nothing but a reward for contributing to the bottom line. The wage is a commission on the value that was added to the business.

The combination of socialist labour laws and militant unions with their unproductive and destructive wage demands is a tool of extraction and exploitation of business owners and employers. The political and legal framework punishes entrepreneurs and investors with labour laws, wage demands, taxes and militant action.

These unintended consequences push the cost of labour above the value of labour. It turns a contributor into an exploiter. Businesses cannot afford to employ people because socialism puts too high a price on that job. The ANC use the laws of supply and demand to benefit Cosatu members. The Tripartite Alliance has a monopoly on jobs and they “hoard jobs”, as part of an effort to raise wages of the politically connected working elite.

Luthuli House is the actual unemployment factory. The Tripartite Alliance has an inventory of 20 million unemployed people. They manufacture them by the millions, and like the French dairy farmers, they dump their produce in the streets to create a shortage and push up the price.

Moneyweb: Your ridiculous censorship of comments is a disgrace. Getting close to ending my association with your race-biased approach to comments. Go to hell!

Moneyweb: Where only anti-White comments are welcomed. GFY.

so called democracies are failing because they arent democracies..instead they create greedy oligarchies and self enrichment…at the ex[ense of the poor.

Nice try. Now do Cuba. Or Afghanistan or north Korea or any one of yr tried and failed communist states….

End of comments.

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