Clem Sunter

The latest South African flags and scenarios

2016-08-01 10:00

Clem Sunter

As I have said in my two previous columns, any strategic decision demands that you look at least five to ten years ahead, and picture what the future might have in store. In the case of many South Africans, this statement is equivalent to carrying coals to Newcastle. For the last 50 years, the terrifying scenario of an apocalypse has been played in lots of anxious minds leading to the question: shall I emigrate with my family or should I stay?

For some of those who left and have found the pastures not so green, they cannot wait for the apocalypse to happen here to justify their original decision to leave. For those who stay, the hope remains that things will improve to the point that it will wipe the smug smile off the faces of the ones who left.

Then there is the old saying that a man and his money should live on separate continents. This illustrates the less extreme decision of diversifying your risk by having a sufficient contingency offshore in the event of the balloon going up here. The generous regulations governing the annual Rand amount you can convert into foreign currency has meant that plenty of law-abiding and wealthy citizens have exercised this option.

The other way of doing so is to hedge the Rand by buying into funds with overseas shares as a component of their portfolio or directly into companies which sell their goods and services for foreign currency or have businesses in other countries.

So what are the latest scenarios for South Africa? Before answering this question, I have to follow the same methodology that I used for the global scenarios. This entails the identification of the clockwork and cloudy flags to watch as they represent the prime forces driving society in a positive or negative direction. Let me do that first.

Most of these flags have been chosen by members of the executive management of organisations for which Chantell Ilbury and I have facilitated their annual strategic workshops. They are discussed in more detail in Flagwatching, a book I recently published, along with the scenarios derived from them.  I will be covering the scenarios later in the article.

The treatment of corruption

This flag is a tapestry of red and green: red because of all the incidents of corruption revealed by the media, and green because of the independence and energetic reporting of the journalists assigned to cover the stories of corruption. In addition, the independence of spirit shown by institutions like the Constitutional Court and Public Protector gives one cause for optimism. Such bodies represent the real checks and balances in our democracy.

However, that independence has to be protected at all costs as the end of the corruption road has been graphically illustrated by two countries: Brazil and Venezuela. Despite hosting the Olympic Games, Brazil’s economy has fallen from grace, having once been the shining star of the developing world. In Venezuela, citizens are walking across the border to find food, besides which the country has run out of medicines through non-payment of its international suppliers.

By contrast, the strength of social media in South Africa makes censorship of the news here impossible. It has provided a rallying call for protests against lack of service delivery caused by corrupt tendering practices. The push back by the public is there and could be reflected in the outcome of the municipal elections this week. That could be a flag of note in terms of indicating the general degree of exasperation with the lack of commitment being shown by the authorities in handling this problem.

Quality of infrastructure

No nation’s economy can grow at a reasonable pace without a decent infrastructure which, apart from the physical stuff, includes education, health and law and order. The green side of this flag is indicated by the absence of load-shedding recently and by the fact that the maintenance of the older power stations is now being properly attended to. On the other hand, there are plenty of parastatals where the boards are in complete turmoil. Equally, as one CEO of a private company said at a recent planning session, in parts of the country we do not drive on the left of the road but on what’s left of the road! Like the last flag, this one is still a cloudy one pointing in both directions.

Bearing in mind the clockwork flag of climate change ticking away in the background, the quality of water infrastructure and smarter water management systems to reduce consumption are set to become the number one priority in the country’s future.

Style of leadership

A country can only be a winning nation with a relatively united team. At the same time, it is one where diversity is seen as a source of strength rather than a weakness.  In today’s fragmented world, the kind of inclusive leadership required to make this so is sadly lacking in all corners of the Earth. South Africa had a brief honeymoon period under Nelson Mandela with his passion for reconciliation, but sadly we have relapsed into a state of division not seen since before 1994.

The question arising from this flag is where the next inclusive leader will come from, who can continue the reform process without compromising the lofty goals of Mandela. That person will need exceptional vision in order to persuade the broad swathe of citizens- both black and white- to accompany him or her on the next stage of the journey. Perhaps it will be from the ranks of the ‘born frees’ that such a person will arise rather than from the previous struggle generation.

We shall have to wait and see, but the resolution of sensitive issues like the future ownership of land and universal access to acceptable education and health rely on this type of leadership. Giving people sufficient freedom and resources to fulfil their potential and motivating them thereafter to accomplish it themselves is the essence of the leadership style required to turn this flag green. Some excellent candidates already exist in our communities, but they have yet to throw their hat into the political ring.

Pockets of excellence

This flag is the one with most cause for optimism. Pockets of excellence exist all over South Africa in both the public and private sectors. The critical issue is whether these pockets of excellence are replicated in earnest over the next five to ten years or whether they are dumbed down. For example, we have 28 000 schools in South Africa of which 5 000 are reasonable to excellent and 23 000 are dysfunctional to shocking. Will the good schools be used as models to raise the standards of the poor ones or will their academic and sporting prowess be gradually undermined as they are seen to be too elite? A similar question applies to our universities. Will they be financed sufficiently to retain their excellence or will lack of funds send them into a tailspin? Transformation is a tricky balancing act. Nevertheless, to succeed in this competitive world, you need as many stars as you can muster.

Level of economic freedom

The South African economy is currently stalled with an almost record unemployment rate. It is dominated by big corporations and overwhelmed by bureaucratic regulations. The currency is one level above junk status. Meanwhile, the barriers between the township and mainstream economies remain firmly in place to the extent that economic apartheid is in reality stunting the opportunities to advance available to the average citizen. Hence, this flag is the most important one of all in giving an indication of whether South Africa will break the present mould of one nation/two economies positively or negatively.

Given the revolution of work by automation, the small and micro business sector is now the major engine of job creation around the world. The bottom line is that for South Africa to create five million jobs, it will require one million new businesses to be established. To achieve this means levelling the playing field at the same time as encouraging the entrepreneurial spark to spread to all urban and rural parts of the country.

As this issue has not been dealt with adequately enough in the National Development Plan and a public/private partnership is a necessary condition to improve economic freedom for all, an Economic Codesa would be a step in the right direction. America is only in the prime position it is today because of its appreciation of the role entrepreneurs play in building the wealth of a nation. For example, an American of Syrian extraction has done more to change the world than any American president in modern times. His name is Steve Jobs.

The scenarios to 2026

Given these five flags which are all cloudy due to the degree of uncertainty surrounding them, what are the scenarios for South Africa over the next five to ten years?

In the original scenario exercise done by Anglo American in the mid-1980s, two crossroads had to be successfully negotiated in order for South Africa to be firmly on the ‘High Road’ to a winning nation. The first was a political crossroads where the choice was between a genuine democracy offering universal franchise versus the co-option of tame representatives into an artificially constructed parliament. The right road was taken. But then a second crossroads might well  be encountered some twenty years later where the choice was between growing an inclusive free-market economy to go alongside the political democracy; or undoing all the political progress made during the transition on account of failure of economic growth. That would be the ‘Low Road’.

We are at that moment in time right now which is why we need an Economic Codesa as urgently as we needed the Political Codesas of the early 1990s. Yet the will to negotiate a new economic model, which will demand give-and-take by the government, the private sector and the unions, may not be there. Maybe two miracles are too much in one lifetime. So I attach an equal probability of 45% to the High Road scenario continuing, where the flags on all five fronts turn into a vivid green; and 45% to the Low Road where they combine into the uniformly red colour of dashed hopes.

The final 10% probability is reserved for a scenario, also envisaged in the original Anglo study, of the Low Road deteriorating into a ‘Waste Land’ in which South Africa becomes a Failed State marred by continuous conflict and at worst by civil war. The risk of this apocalyptic scenario increases the further down the Low Road the country goes.

Conclusion

The future cannot be mathematically quantified so my instinct is no better than yours. The only thing I advise is that the strategic decisions you make about your business, your family and your own life should be consistent with your interpretation of the flags and your assessment of the probabilities you ought to apply to the scenarios. I can vouch for the validity of the method outlined in the article, but not the accuracy of the result. In the end, it’s your call: all the best in making the right one.

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