The last Insight went out just before the ANC's National General Council met. That was intended to be an important meeting and the general hope was that greater clarity would be reached on economic policy and policy directions. However, as is now generally acknowledged, it was dominated by President Zuma's opening speech focusing strongly on discipline and on organisational matters. The result is that this was the dominant theme of the Council meeting, with scant attention being given to economic issues. As Investment Solutions' economist Chris Hart said afterwards: "The country simply doesn't have a long-term growth strategy." It is against this background that I'd like to comment on HSBC's termination of take-over talks with Old Mutual and Nedbank.
HSBC's expression of interest in Nedbank was very correctly seen in South Africa as a major development and positive expression of interest in the country. The South African media, and probably Old Mutual and Nedbank themselves, played up the possible deal. And because of this, HSBC's decision to end discussions was so much more disappointing to the South African institutions and South Africans generally. What aggravated the situation is that HSBC, when announcing its withdrawal, gave no reason - leaving it open to speculation. On Friday last, HSBC did give a reason, namely that Nedbank had simply not met its (HSBC's) strict acquisition criteria.
Business Day's editorial response to these happenings was possibly written before the most recent statement by HSBC. But it is important and for that reason is quoted at some length: "A deal this size would not have been dreamed up in a flash. There has been speculation about Old Mutual selling Nedbank for so long, HSBC would have been part of it way before the World Cup in June/July. Back then, anything seemed possible. SA pulled off a huge feat by constructing its facilities for spectators and teams on world-class standards. The country was united and excited. If a potential investor hadn't been excited about us then, when would they? Then the soccer ended and the South African story picked up where it had left off - a fight for power in the ruling party and, as part of that, a voracious attack on the free media. And the mines would be nationalised, declared the powerful ANC Youth League, and so would [and this HSBC would most certainly have taken note of] the banks. And did the leader of the ANC and of the country, President Jacob Zuma, stand up and shut them up? No. ....... If you were HSBC, you would have been astounded at the speed with which the atmosphere soured here after the World Cup. They were considering spending upwards of US$5 billion and it seems to us [Business Day] that it would be more than naive to assume that politics did not play a part in persuading them to go away. The ANC and its leader need to understand that money doesn't grow on trees. If we cannot make investors safe as we did visitors to the World Cup, they simply won't come here. You cannot have a ruling party threatening to nationalise huge businesses and expect business to carry on as usual. SA is going to become just too much bother."
Whatever the specific reason for HSBC's decision, most people would say Business Day's comment is justified.
While the ANC and its partners at their National General Council ignored the critical economic issues facing the country - jobs, hopeless service delivery, under-skilled municipalities, etc. - by contrast these issues were the centre of discussion at last week's South African Chamber of Commerce and Industry's (SACCI) Annual Convention. SACCI has its origin in the South African Chamber of Business (SACOB) which was established in 1945. It has approximately 50 affiliated chambers, many uni-sectorial associations and a large number of corporate members across all nine provinces. It is affiliated to the International Chamber of Commerce (ICC).
Under its present leadership, SACCI has worked hard at maintaining good relations with both government and labour. In fact, two influential ministers - Tokyo Sexwale and Ebrahim Patel - addressed its convention last week. However, the organisation's concerns were reflected in the motions which it passed and in the debates and free-flowing floor discussions. The motions related to, among other matters, lessening the growing reliance on road transportation by strengthening rail and rail freight; accountability and transparency in service delivery; and the shortage and need to develop technical skills.
But what was hugely impressive was a panel discussion following an excellent presentation by Colin Coleman, Managing Director of Goldman Sachs. The panellists included Andrew Etzinger of Eskom; Dennis Dykes, Chief Economist of Nedbank; and a down-to-earth and hard-headed journalist Ellis Mnyandu, recently appointed deputy editor of Business Report. They focused on what Dykes described as "getting down to basics" - teachers teaching, nurses nursing; the development of a long-term vision for the economy; the state enabling business rather than hobbling it; and the constant pressure for an open economy. As one of these bright fellows said - "These are things that we need to do because the world economy right now is very encouraging - we would find that there's lots of money available."
Organisations like SACCI strengthen not only civil society but are quite critical to the future of this country - one of the things which distinguished South Africa from the rest of sub-Saharan Africa.
Chairman, Omega Investment Research
Cape Town, South Africa