Susan Shabangu and Anglo Plats

 

The announcement by Anglo Plats that it is to close several shafts and lose 14 000 jobs comes as no surprise to any intelligent observer.  That sort of action is inevitable, given the free-wheeling nature of Government actions, the ever-increasing burden on employers and the inability of the Government to provide a set of labour market conditions that is conducive to the creation of jobs.  These factors have been in operation for virtually the duration of the ANC control of the Government, and show all the signs of becoming increasingly investment-unfriendly.

The response by the Minister of Mineral resources is also no surprise.  The ANC Government as a whole has a tendency to act as though it is the sole arbiter of what happens in the direct investment field.  The arrogant comments made by this particular Minister, one who has failed to cover herself in glory, is equally typical of the statements by representatives of Government and the ANC.

What are the broader facts?

Investors make an investment decision on the basis of the expected return on the investment in the light of the perceived risks of the investment, and the return and risk profile of all the alternative investment possibilities.  The decision does not take into account Government policies, Party desires and Ministerial sensitivities.  It ignores all factors in the economy that do not bear directly on the risk and return.  All of these extraneous factors may play a role once the investment has been made, and frequently blackmail is exercised by the Government and the Unions to achieve their desires in the short term, but the fact remains that the people who really count, the investors who put up the money that is then used as a blackmail tool, will sooner or later make a rational decision based entirely on the fundamentals that are important to them – risk and return.

The desires of the Government play practically no role unless they are converted to legislation or extra-legislative threats to the business in which the investors have made their investments.  The sort of petulant statements, as that made by the Minister, Susan Shabangu, go a very long way to assure the foreign investors that South Africa is not a good place to be.  These statements come on the heels of months of discussion regarding the nationalization of the mines, often demanded without compensation, the threat of compulsory acquisition of a share in the companies by Government or by Government-favoured stooges under the guise of Black Economic Empowerment.  They follow the withdrawal by a number of wealthy foreign direct investors who saw, early on, that South Africa is following the Zimbabwe route to economic disintegration, and the proof of that in the call by the ANC for foreign buyers to boycott South African products like wines and grapes.

The facts are that the ANC is proving to foreign investors that South Africa wants their money, but does not wish to offer a fair deal in return.  The final fact is already becoming clear:  Foreign direct investment, an absolute essential for growth in South Africa, is starting to look beyond the Freedom Struggle rhetoric and to see the economic basket case that South Africa is becoming.