Melanie Veness - Investment Incentives
2016-06-21
I was recently at a meeting at which we were discussing incentives to attract investment to our province. Organised Business made the point that we needed to be careful when doing so, to ensure that we do not inadvertently create uneven playing fields for those businesses that have already invested in our province. If we offer rates holidays and services relief to new investors who offer products and services in competition with existing businesses, then the new investors will obviously enjoy an unfair competitive advantage in the market place, and what may in fact occur, is that you will achieve employment in the new businesses and retrenchment in the existing businesses, resulting in no economic development and no net increase in jobs. If you offer an incentive to a new business, existing competitors should enjoy similar benefits.
The other point under discussion at the meeting was the current political instability. Firstly, I must say that I was disappointed to hear a senior economic development official trying to deny the existence of any political instability. Perhaps he doesn't watch the news?
Anyway, denialism aside, the political instability is constraining for business. It makes South Africa unattractive from an investment perspective (who wants to build factories in places where there is a real risk that they'll be burnt down) and risky from a trade point of view.
I was recently contacted by one of my members, who explained that they were battling to order a machine from a supplier overseas, who they had been dealing with for many years. They normally order the machine and have to make payments in tranches, as the machine is built. The supplier however, citing political instability and uncertainty in the country, is now requesting guarantees from the bank for the entire cost of the commissioned machine. My member, a medium sized engineering firm, explained that if the bank were to provide the requested guarantees, then 80% of his overdraft facility would be unavailable for the next five months, the time that it would take to build the machine. He is unable to operate his business under these conditions.
My point is that while it might be more convenient to deny issues such as political instability, we do so at our own peril.
Business also raised the fact that our current economic circumstances mean that a large number of existing businesses are in serious trouble and that it would make sense to be proactive and to put a retention strategy in place. The MEC for Economic Development agreed, and to his credit, very soon after that meeting, a request came from Trade Investment KwaZulu-Natal (TIKZN) for a list of businesses currently in distress. I put the call out to my members and the responses came in, one after
another.
How sad it made me feel to receive those phone calls and emails.
If you think generally about the fact that economic conditions are challenging, it doesn't hit home quite as hard as when you have leaders, that you know and respect, explaining their current business realities or when you see big factories going into liquidation.
Leadership, we're at the coal face and it's not pretty. We're in trouble and we need you to stand up.
American writer and political commentator, Walter Lippmann said: "A man has honour if he holds himself to an ideal of conduct though it is inconvenient, unprofitable, or dangerous to do so."
We need you to stabilise things.
This article was previously published in The Mercury: Network
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