“The world recovery has started but the challenge is to sustain it”, says a World Bank research article http://www.imf.org/external/pubs/ft/weo/2009/02/pdf/text.pdf . Sentiment often drives confidence which IN TURN drives actual recovery. Sentiment in South Africa has not seemed to change dramatically as can be seen from the recent business confidence index.
What policies has government put in place to ensure recovery? The Economic Freedom of the World: 2009 Annual Report has stated that South Africa has improved from 7.03 to 7.06 (out of 10). This ranks them 57 out of 141 countries. On the surface this looks good but South Africa has declined from 54th in 2008 as they were overtaken by Armenia, Botswana, the Czech Republic, Greece and Kenya. http://www.freemarketfoundation.com/ShowArticle.asp?ArticleType=Issue&ArticleId=2691
So what is it that we need to do to keep improving our rankings? The Mauritius government made a concerted effort to improve its ranking and make Mauritius more investor friendly and to reduce unemployment. It is now the highest ranked country in Africa and one of the freest in the world (ranked at 16).
How can South Africa, who has the largest economy in Africa, make improvements which I believe we can. Some of the areas that South Africa improved on from last year were:-
• Size of government: improved from 6.97 to 7.20
• Freedom to trade internationally: improved from 6.71 to 6.77
• Regulation of credit, labour and business: improved from 7.02 to 7.09
“Even though a banking crisis can be very painful, it is an illusion that they can be fully ruled out by better government regulation. In fact, a case can be made that perverse regulations in combination with the creation of too much liquidity played a key role in the creation of the current crisis,” said Fred McMahon, director of the Centre for Globalisation Studies at the Fraser Institute.
The short term response from governments after a banking crisis is to reduce economic freedom but as the experience from Norway and Sweden shows that this is not necessarily the case and in the long term governments can improve economic freedom after a financial crisis.
I believe that the South African government is on this trajectory of improving economic policies. We have no choice as South Africa has to bring in long term investment and not only money from the ”carry trade” as it is currently doing. Better policies will also improve employment as will better BEE policies. The future will give us that 20:20 vision but I feel quite positive.
Sunday, November 29, 2009
Sunday, September 13, 2009
Bail outs are wrong for the consumer
I have always said that the bail outs governments have given companies are erroneous, if not bordering on the immoral.
A statement made by International Monetary Fund Managing Director Dominique Strauss-Kahn confirms what I have been thinking and saying for a while now.
Sure we need banks to survive, but if they are inefficient they should be left to die. Some people may have to take some short term pain but if this is not done then all people will have to take long term pain.
Strauss-Kahn stated on Sunday that governments will have to have an exit strategy. When asked how this will be done by Der Spiegel, Strauss-Kahn said “a combination of higher interest rates and ending direct intervention of central banks would be needed.” http://www.reuters.com/article/newsOne/idUSTRE58B0K620090912
In the end who will suffer by the bank bail-outs? The consumer - we will be paying higher interest rates so that governments get their capital returned. By using the money to bail out banks denies government with money they could have used for health care, schools, roads and infrastructure. All these items will increase competitiveness of the country and provide much needed and improved human and social capital.
A statement made by International Monetary Fund Managing Director Dominique Strauss-Kahn confirms what I have been thinking and saying for a while now.
Sure we need banks to survive, but if they are inefficient they should be left to die. Some people may have to take some short term pain but if this is not done then all people will have to take long term pain.
Strauss-Kahn stated on Sunday that governments will have to have an exit strategy. When asked how this will be done by Der Spiegel, Strauss-Kahn said “a combination of higher interest rates and ending direct intervention of central banks would be needed.” http://www.reuters.com/article/newsOne/idUSTRE58B0K620090912
In the end who will suffer by the bank bail-outs? The consumer - we will be paying higher interest rates so that governments get their capital returned. By using the money to bail out banks denies government with money they could have used for health care, schools, roads and infrastructure. All these items will increase competitiveness of the country and provide much needed and improved human and social capital.
Sunday, August 2, 2009
Centre left
I read an article in the 1st August 2009 edition of the Economist that the centre lefts are gaining ground. Looking at South Africa it seems that the unions and communist are the one’s setting policy. Thank goodness, I must say, for pragmatists like Max Sisulu, Trevor Manual and Ben Turock.
Nationalisation of the mines would undermine South Africa’s ability to compete for Foreign Direct Investments. The argument, by the leftists, may be that this is not forthcoming during the world economic meltdown. This meltdown will be short lived and boom times will be back again. The recession may take a while to turn into a recovery, but it will be back either this year or next or the year after. A policy of nationalisation will have a long term effect on business confidence and FDI, two of the main driver of the economy.
A country needs to use it resources productively. This includes, people, capital and assets. Nationalisation has not allowed this to happen. Some prime examples in South Africa are Eskom, SAA and Telkom. These nationalised assets hold the country back rather than feeding the purses of government who in turn promotes poverty alleviation. In-fact it increases poverty due to the inefficiencies these state owned assets have.
I know times are tough, money is in short supply and people need to be employed. Building a large middle class in South Africa is of paramount importance. CSI (Corporate social investment) initiatives, upliftment projects and educational development by the private sector must be encouraged. It is to their benefit. As more people move out of the quagmire of poverty so does the private sectors potential for growth increase through an increase in the market size.
Companies must be involved with CSI projects because it is the best thing for the country and its people in the short term and good for the company in the long term. Companies must not engage just to look good. (See article on Brand legitimacy on http://ornicomediainformation.blogspot.com/ )
Governments, especially those in the developing markets, must remember that growth can only occur if the government enables business to grow. This will allow them to invest. The less risks and higher returns business has, more likely they will employ, the more taxes they will pay and the more government coffers will increase. This increase in taxes then can be used on enabling the economy with better education for it’s people, better healthcare and better infrastructure.
Nationalisation of the mines would undermine South Africa’s ability to compete for Foreign Direct Investments. The argument, by the leftists, may be that this is not forthcoming during the world economic meltdown. This meltdown will be short lived and boom times will be back again. The recession may take a while to turn into a recovery, but it will be back either this year or next or the year after. A policy of nationalisation will have a long term effect on business confidence and FDI, two of the main driver of the economy.
A country needs to use it resources productively. This includes, people, capital and assets. Nationalisation has not allowed this to happen. Some prime examples in South Africa are Eskom, SAA and Telkom. These nationalised assets hold the country back rather than feeding the purses of government who in turn promotes poverty alleviation. In-fact it increases poverty due to the inefficiencies these state owned assets have.
I know times are tough, money is in short supply and people need to be employed. Building a large middle class in South Africa is of paramount importance. CSI (Corporate social investment) initiatives, upliftment projects and educational development by the private sector must be encouraged. It is to their benefit. As more people move out of the quagmire of poverty so does the private sectors potential for growth increase through an increase in the market size.
Companies must be involved with CSI projects because it is the best thing for the country and its people in the short term and good for the company in the long term. Companies must not engage just to look good. (See article on Brand legitimacy on http://ornicomediainformation.blogspot.com/ )
Governments, especially those in the developing markets, must remember that growth can only occur if the government enables business to grow. This will allow them to invest. The less risks and higher returns business has, more likely they will employ, the more taxes they will pay and the more government coffers will increase. This increase in taxes then can be used on enabling the economy with better education for it’s people, better healthcare and better infrastructure.
Wednesday, July 22, 2009
Unions destroy jobs
The World Economic Forum (WEF) recently stated that the “most problematic factors for doing business” in South Africa was an inadequately educated workforce, infrastructure and crime.
The unions in South Africa are constantly lambasting Tito Mboweni for his stance on inflation targeting. Unions should be more focused in getting our workforce more globally competitive.
This will enable us to sell our locally produced products internationally thereby creating more jobs.
The strength of the Rand and the state of the global economy has not helped either. South Africa has many of the raw materials needed for manufacturing products that are consumed. Government has also been calling for beneficiation to take place.
Beneficiation should benefit many of the workers and increase the workforce. This cannot be done if we are not globally competitive and our workforce is inadequately educated.
Investors will only invest if they can see a return on their investment. Globalisation has allowed us to distribute to the world, now we need our workforce to be globally competitive.
If we are not globally competitive, the country will not be able to create jobs, something the unions should focus on.
The cry against inflation targeting by the unions is really short sighted as goods and services will become more expensive for everyone if inflation is not kept in check but will hit the poorest of the poor more than the affluent. Lets hope tha Gill Marcus will not bow to unions demands
The unions in South Africa are constantly lambasting Tito Mboweni for his stance on inflation targeting. Unions should be more focused in getting our workforce more globally competitive.
This will enable us to sell our locally produced products internationally thereby creating more jobs.
The strength of the Rand and the state of the global economy has not helped either. South Africa has many of the raw materials needed for manufacturing products that are consumed. Government has also been calling for beneficiation to take place.
Beneficiation should benefit many of the workers and increase the workforce. This cannot be done if we are not globally competitive and our workforce is inadequately educated.
Investors will only invest if they can see a return on their investment. Globalisation has allowed us to distribute to the world, now we need our workforce to be globally competitive.
If we are not globally competitive, the country will not be able to create jobs, something the unions should focus on.
The cry against inflation targeting by the unions is really short sighted as goods and services will become more expensive for everyone if inflation is not kept in check but will hit the poorest of the poor more than the affluent. Lets hope tha Gill Marcus will not bow to unions demands
Sunday, May 17, 2009
The free market system still works
Bail outs, protectionism, social unrest, failure of the free market system, inflationary fears are some of the words that are been used to describe the current economic crisis. What are the politicians and fringe economists accomplishing with those words?
Firstly certain politicians want more power to control the population. Larger governments, more control, more power means more corruption and inefficient industries.
I am trying to recollect when government run businesses are efficient, well run and profitable. Not in too many cases. Let’s look at Telkom, Eskom, SAA and the Post Office as examples. Telkom may be profitable but that is because Vodacom, a free market company, brings in all the profit. SAA keeps asking for more of our tax payer’s money to be bailed out.
Governments must be an enabler to allow business to flourish and employ people and create jobs.
Failure of the free market system
The fact that the world economy has grown so quickly is one of the reasons for the success of the free market economy. That is why, slowly, countries like China, India Russia and South Africa have begun to embrace it. Down turns are part and parcel of the free market system that corrects the excesses, greed and inefficiencies of the past.
Part of that unfortunate cycle is that jobs are lost. But there are also many advantages as people who have lost their jobs begin to start their own entrepreneurial companies. Competition will increase and therefore prices will stabilize and the monolithic companies, who have not been given bail outs and therefore failed or become smaller, will now have more competition.
Government should look to enable people who have lost their jobs to start their own businesses, make it easy to licence them and start trading quickly. Easy access to capital for starting a business must be given rather than supplying UIF and money for the dole. Human beings want to feel useful rather than be reliant on the state. It is better for their self confidence.
Protectionism
Some governments and fringe economist endorse protectionism. If a country is ineffective in a particular industry it should not operate in that industry and must be left to the country that producers the product or service more efficiently. This should happen even in the world of job losses such as the one we have now as we know it will be only temporary.
How much poorer would the consumer be if we did not have Chinese clothes that we buy for a fraction of the costs that we can produce it.
We need to find where our strengths are and use them. I still suspect that our medical industry and medical tourism can compete will any in the world including India, that is if our minsters do not add too much red tape and kill the industry and the opportunity to be one of the top private healthcare centres in the world, and cheaper than most in the first world.
Inflationary fears
The bailout and government interference will create inflation. Printing money, near zero interest rates, increased debt repayment due to increased lending will increase the prices and that will not be good for the consumer.
Therefore the free market must be allowed to clear itself of the inefficient companies and people, without the interference of government in controlling the finances. Government should be there to enable a much more competitive environment, easier access to finance and less red tape in stating a business.
The free market system, if allowed to work will not disappoint us in the long run, if central planning is allowed to prevail, we as consumers will suffer in the long run.
Written by:
Oresti Patricios
C.E.O.
OrnicoGroup
www.ornicogroup.co.za
Firstly certain politicians want more power to control the population. Larger governments, more control, more power means more corruption and inefficient industries.
I am trying to recollect when government run businesses are efficient, well run and profitable. Not in too many cases. Let’s look at Telkom, Eskom, SAA and the Post Office as examples. Telkom may be profitable but that is because Vodacom, a free market company, brings in all the profit. SAA keeps asking for more of our tax payer’s money to be bailed out.
Governments must be an enabler to allow business to flourish and employ people and create jobs.
Failure of the free market system
The fact that the world economy has grown so quickly is one of the reasons for the success of the free market economy. That is why, slowly, countries like China, India Russia and South Africa have begun to embrace it. Down turns are part and parcel of the free market system that corrects the excesses, greed and inefficiencies of the past.
Part of that unfortunate cycle is that jobs are lost. But there are also many advantages as people who have lost their jobs begin to start their own entrepreneurial companies. Competition will increase and therefore prices will stabilize and the monolithic companies, who have not been given bail outs and therefore failed or become smaller, will now have more competition.
Government should look to enable people who have lost their jobs to start their own businesses, make it easy to licence them and start trading quickly. Easy access to capital for starting a business must be given rather than supplying UIF and money for the dole. Human beings want to feel useful rather than be reliant on the state. It is better for their self confidence.
Protectionism
Some governments and fringe economist endorse protectionism. If a country is ineffective in a particular industry it should not operate in that industry and must be left to the country that producers the product or service more efficiently. This should happen even in the world of job losses such as the one we have now as we know it will be only temporary.
How much poorer would the consumer be if we did not have Chinese clothes that we buy for a fraction of the costs that we can produce it.
We need to find where our strengths are and use them. I still suspect that our medical industry and medical tourism can compete will any in the world including India, that is if our minsters do not add too much red tape and kill the industry and the opportunity to be one of the top private healthcare centres in the world, and cheaper than most in the first world.
Inflationary fears
The bailout and government interference will create inflation. Printing money, near zero interest rates, increased debt repayment due to increased lending will increase the prices and that will not be good for the consumer.
Therefore the free market must be allowed to clear itself of the inefficient companies and people, without the interference of government in controlling the finances. Government should be there to enable a much more competitive environment, easier access to finance and less red tape in stating a business.
The free market system, if allowed to work will not disappoint us in the long run, if central planning is allowed to prevail, we as consumers will suffer in the long run.
Written by:
Oresti Patricios
C.E.O.
OrnicoGroup
www.ornicogroup.co.za
Friday, May 1, 2009
Xenophobic attacks on the increase
Watching the Mayday celebrations shows an increase in xenophobic attacks internationally. In Russia 50% of the population are against any foreign workers in that country. This was done on a day that was supposed to unite workers all over the world.
How will governments respond to this? Do they go back to closed societies and kill globalization or do they try and come to an agreement that suits all countries?
In the past the G7 decided how the world economy should be addressed. Now the G20 is trying to make decisions for the rest of the world. The problem is that the western economies are still trying to hold onto that power, even though it is slipping away from their grasp.
Downturns are important both for businesses and governments and they need to run their course.
It is important for businesses as the strong survive. This is the same in the animal kingdom when there is a drought in the bush.
The down turn helps governments to realise where they are going wrong. Governments need to relook at education, healthcare, climate change and caring for the populace and not themselves.
What is happening is that they are clamping down on businesses, adding more red tape and therefore more costs.
What should happen is that governments should make it easier for businesses to hire staff, allow the unemployed start their own businesses and ensure that businesses are also adhering to the triple bottom line. This triple bottom line red tape in place, the authorities should just enforce it rather than add more red tape.
When this economic down turn changes, will governments regret what they did or will they blame the previous administration.
Xenophobia is created because we as human beings do not care for our neighbours. These neighbours could be next door to us, in the next suburb, city, country or continent. We are one human race that needs to care for each other.
Written by Oresti Patricios
C.E.O.
OrnicoGroup
How will governments respond to this? Do they go back to closed societies and kill globalization or do they try and come to an agreement that suits all countries?
In the past the G7 decided how the world economy should be addressed. Now the G20 is trying to make decisions for the rest of the world. The problem is that the western economies are still trying to hold onto that power, even though it is slipping away from their grasp.
Downturns are important both for businesses and governments and they need to run their course.
It is important for businesses as the strong survive. This is the same in the animal kingdom when there is a drought in the bush.
The down turn helps governments to realise where they are going wrong. Governments need to relook at education, healthcare, climate change and caring for the populace and not themselves.
What is happening is that they are clamping down on businesses, adding more red tape and therefore more costs.
What should happen is that governments should make it easier for businesses to hire staff, allow the unemployed start their own businesses and ensure that businesses are also adhering to the triple bottom line. This triple bottom line red tape in place, the authorities should just enforce it rather than add more red tape.
When this economic down turn changes, will governments regret what they did or will they blame the previous administration.
Xenophobia is created because we as human beings do not care for our neighbours. These neighbours could be next door to us, in the next suburb, city, country or continent. We are one human race that needs to care for each other.
Written by Oresti Patricios
C.E.O.
OrnicoGroup
Thursday, April 30, 2009
Fiscal Policy
The Government announces that fiscal policy will remain. The new adminatration will concentrate on service delivery and the poor. Both are nobel ventures. Service delivery can be done without changing the fiscal and monatary policies but subsidies for the poor cannot be done without increasing debt or taxes as less revenue is currently been collected.
Government should look at making it easier for companies to do business. This will create jobs and increase taxes. They can then spend this on the poor.
Service delivery needs only proper systems and proceedures in place as money has already been allocated
Government should look at making it easier for companies to do business. This will create jobs and increase taxes. They can then spend this on the poor.
Service delivery needs only proper systems and proceedures in place as money has already been allocated
Thursday, March 26, 2009
Mathew Phoza
Bailouts of any nature are wrong as they reward inefficiencies, mismanagement and set a bad example. The other reason is who should be bailed out and who should not. If you are a large organisation and you hire thousands or a small one employing just a few.
Mathews Phoza made a comment yesterday that he would not bailout private companies. The reason is that he cannot reward those enterprises for mismanagement and the huge bonuses that are paid to these executives. I agree with him.
He also stated that they would consider bailout for public enterprises. This is just as unacceptable and government are setting a bad example. One of the ANC election manifestos is to have a government that is accountable to the people, is efficient and implements the policies of the ANC.
Better governance, is the key for economic growth and a better life for all. That indicates that government should also not bail out public enterprises and go back to the late 90’s or early 2000 when these enterprises were been privatised.
Mathews Phoza made a comment yesterday that he would not bailout private companies. The reason is that he cannot reward those enterprises for mismanagement and the huge bonuses that are paid to these executives. I agree with him.
He also stated that they would consider bailout for public enterprises. This is just as unacceptable and government are setting a bad example. One of the ANC election manifestos is to have a government that is accountable to the people, is efficient and implements the policies of the ANC.
Better governance, is the key for economic growth and a better life for all. That indicates that government should also not bail out public enterprises and go back to the late 90’s or early 2000 when these enterprises were been privatised.
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