Institutional reforms should supersede focus on investments because restoring legitimacy of public institutions is critical
SA has spent enormous time and resources on an infrastructure fund and investment conferences in an effort to boost economic growth. Despite these efforts there is limited evidence that markets have bought into these approaches, apart from the pledges made at the conference. SA’s fixed investment fell 1.4% year on year in 2018, according to data from Stats SA.
Strengthening legitimacy is no small task, which means we must prioritise institutions that are the most critical for maintaining the stability of the SA economy and society. Institutions can be split into three categories: economic, social and legal. Each category has institutions that require a high degree of legitimacy to bolster investor confidence, and thereafter growth and stability.
Not all of these institutions have been adversely affected by the past decade of economic and political mismanagement. For example, the Bank has managed to withstand the headwinds, anchored by strong leadership and sound policies, while Sars and the two government departments have had a series of shortcomings. Therefore, when we think about institutional reforms within this category we need to prioritise carefully.
As a country we have been too focused on feel-good moments, rather than targeted systematic adjustments to ensure greater co-ordination. For example, while SA’s recent investment conference was viewed as an achievement, it was really a basic vehicle for testing the investment appetite. Though people have pledged billions of rand, it remains a sentiment rather than a contract.
However, other entities have weakened under poor management, which has adversely affected safety. According to Stats SA’s annual Victims of Crime survey, there has been an increase in crime since 2016 and citizens are becoming increasingly frustrated with the police. Turning the policing service around is a key priority, because the consequences of not doing so are social and economic.
While investment has dwindled in the recent past and policy efforts are focused on turning this around, the short-sighted approach of focusing on attracting investments, rather than driving institutional reform, will lead to a celebration of commitments without a clear path of action.
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