South African corporates are essentially captives

With our turbulent history, South Africans are accustomed to periodically gaze into the abyss. And then, contrary to the
rational expectations of the rest of the world, the abyss doesn’t gaze implacably back. Instead, it blinks. We yawn, rub our eyes and life goes on pretty much as before.

Following the upheaval, there were renewed and strident demands for a universal basic income grant. President Cyril Ramaphosa, after agreeably musing whether this was, indeed, not the moment to add a R200 billion straw to the camel’s back, decided instead on a social distress grant that will cost a mere R27 billion.

And the Treasury’s R39 billion package of relief measures will, we are assured, require no new borrowings. The costs will be funded from an estimated R100 billion revenue windfall from the recent commodities boom.

Isn’t that fortunate? Instead of unrest being a knockout punch to an already staggering economy, it appears SA could fund another round of unrest without skipping a budgetary beat.

And South Africans have again shown an admirable “maak ’n plan” adaptability without waiting for state intervention. And the instinct to remorselessly hunt out a silver lining affects even our economic sages.

Rand Merchant Bank’s chief economist Etienne le Roux points to SA’s “inherent resilience” and that the upside of the destruction is that it will have an economic “kicker” effect.

Looted businesses that were not destroyed will have to be restocked; those that have been destroyed will have to be rebuilt. By implication, the Le Roux scenario means both South Africans and overseas investors have substantially higher tolerances for risk than before. That might be true.

At Sharpeville in 1960, white police officers shot dead 69 black protesters, sparking a state of emergency, an economic slump and international isolation. The 1976 Soweto riots ushered in sanctions, diplomatic exclusion, and loss of skills through emigration.

But those atrocities stemmed from the actions of a minority, white government. We and the world appear to be largely inured to the depredations of a majority, black, government.

At Marikana, in 2012, the police shot dead 34 miners and not very much happened at all. Now, in 2021, at least 337 people have been killed.

It may well be the Le Roux assessment is accurate. There are good reasons, however, to be sceptical, especially given the scale of the upheaval.

To the degree that South African corporates have not already divested, they are essentially captives. There is no alternative but to rebuild. After all, there’s money to be made and ultimately the extra costs will be carried by the taxpayer and the consumer.

Yet, it’s not the corporates but individuals to whom we must look for likely trends.

Personal income tax makes up about 40% of our tax revenue, double that of companies. Not only are many of these individuals highly mobile in terms of emigration, but it’s highly likely that an existing inclination to move assets offshore will accelerate.

Journalist Alexander Parker writes perceptively in Business Maverick: “The scale of the damage … in time, will be measured not just by what is gone, but also by what is quietly not replaced; by what noiselessly goes elsewhere; by
what is new and never begun; and by endeavour and enterprise that sets sail from other ports.”