By Johann Theron
Recent commentary by international (financial) companies such as IHS Global and Goldman Sachs stated as follows respectively;
“South African crime at lowest levels in 15 years” (Wall Street Journal)
“Education/healthcare and public sector productivity remain a challenge” (Two Decades of Freedom Report)
That South Africa is a convenient investor destination is obvious, but that investors are getting nervous to the point where they analyze South Africa free of charge is less obvious. The basic tenet of both reports indicates that SA is a great country to invest in, if they could only address the persistent employment issue where crime may have dropped, but poverty remained. The Goldman Sachs report states quite categorically that “labor productivity” improved while poverty remained – because there are fewer jobs with the same/more output. This means however, that labor productivity actually did not improve. This ambivalence requires further investigation.
The CEO of Productivity SA is Mr. Bongani Coka. He recently promoted the growing of South Africa’s economic competitiveness during the yearly productivity month in October. Seen together with the almost co-incidental establishment of a competitive Economic Freedom Fighter political party (against the reigning ANC political party), one can only wonder at the unusually large newspaper splash accorded to this “economic” issue in Business Times of October 27, 2013 p 19.
It is almost as if the ANC wants to say: Look, we really know about economic competitiveness! However, apart from admitting to the (unfortunate) drop in WEF rankings, Coka continues to correctly define Productivity = output/input where this include labor, capital and materials productivity factors. However, he states as follows; “[These factors] are used in their conversion into outputs as efficiently and effectively as possible, thus improving living standards.” It is clear that his focus is on output (in this case living standards) – and not input optimization. For example; Productivity SA issues awards based on the following performance criteria;
South Africa’s competitiveness
The result of the above approach appears to emulate the Department of Education’s outcomes-based curriculum, where according to the Global Competitiveness Index of 2013, South Africa’s education is the worst in the world (or there abouts). It follows then that South Africa’s competitiveness must also be worse off. The facts seem to support this.
It is clear that Mr. Coka’s version of productivity, which could have been derived from Mr. Asmal’s education strategy, is incorrect in its western context – thereby negatively affecting the entire country. Over the last 10 years his organization has been issuing awards for shiny productive performance but it was all in vain. The blunder is not that he apparently followed the footsteps of his esteemed partner in freedom of speech. He was simply blinded by those promising shiny outputs instead of focusing on the hard work of input management. To explain as follows:
Mr. Coka admitted not having statistics on the national labor hours worked and thus the efficiency of the work executed in those hours. Is this not the basic input required in a country competing with highly productive BRIC partners?
Mr. Coka admitted not servicing the Government sector at all. The fact that the entire local government sector is inefficient and ineffective (according to Goldman Sachs), seemed to have escaped him and his boss in its entirety. (To be fair – he works with public enterprises such as South African Airways [sic])
Mr. Coka correctly identified capital productivity as an important factor but failed to implement/measure proper physical asset management processes as required by financial statements. This essentially means that the country’s infrastructure is in reverse mode, however, it benefits the politically attractive option to procure billions of rand’s worth of re-capitalization “solutions” – using never-ending financial bonds followed by the associated clever re-distribution of “capital”.
The competitive deduction in the African context however, is that the more South Africa’s infrastructure reverses, the more efficient the redistribution of shiny capital and so it will continue with the planned massive national transport and electricity supply projects, followed by the great Inga dam project in the Democratic Republic of the Congo.
It follows then that the South African version of productivity = bond value/infrastructure value, which means that productivity of capital redistribution is measured instead of labor. The end-game is foreign investors losing money to the South African elite over the long term. This might also help to explain why South African poverty has been on a plateau for the last two decades.