FutureWorld Thabo Mbeki Ten Things

"Putting South Africa's future first! One last chance for The Right Stuff!"

An open letter to Thabo Mbeki

Ten things the SA government should do before year-end to get us back into the world economy!

By Wolfgang Grulke, CEO FutureWorld

Dear Thabo,

While you're focusing on crime and violence, "labour market flexibility" and the like…here are a few bold things for your agenda that will put South Africa first - before political priorities, like winning the next election! Here are a few things that might just turn the SA economy round in the short and long-term, create skills and work and make us a magnet for investment!

The world has changed. But then you know that. You speak about it often.

It's an open world where the real market power has moved from governments and large corporations to the 'sovereign individual'. As individuals and consumers, we have never had such personal power to shape markets and economies. In world markets, volatility is endemic but growth opportunities are everywhere. South Africa has 'one last chance' to make it in the global market by creating wealth and growth locally - but only if we want to, and only if we consciously choose to! We need your help and leadership.

The pride of our blue chip companies have started a rush to list on exchanges outside South Africa: Billiton, Anglo, Old Mutual, Sappi and SAB!? They will make future investment decisions with a global view - increasing pressure on South Africa to create an increasingly competitive market environment.

Here then are 'Ten Things' the South Africa Government should consider doing immediately to create the environment for growth and wealth creation.

Own up! We must own up to the growth catalysts and the competitive dynamics of the new global economy, even if these are not politically correct. Tell people that the 'old' jobs are gone forever, that unemployment will increase before it can decline and that there are some new rules of work and wealth out there. What we need is 'intellectual honesty'! Thabo, you fully understand the realities of this global economy. It may be naïve to believe that a politician can get off the political agenda for a while, but if you can and put the real needs of South Africa first, then you will be remembered by history in the same hushed tones as your predecessor. Communication is everything, the people of South Africa can understand the economic issues facing us if we take the effort to communicate properly. Given the same open information about the present, my experience is that people across a wide front will come to the same conclusions about the future. But it will initially not be p.c. - this will take great political courage, and strategic patience!

Create the skills for the 21^st century economy! There's no shortage of work or opportunity in the world - only a shortage of skills and ideas! The trouble is that the skills that will fuel the new economy are not based on muscle power but on the ability to harness the power of the mind. We need thinking skills, fundamentally different knowledge and service skills, Let's stop trying to protect the old jobs (South Africa is already haemorrhaging between 10 000 and 20 000 Industrial Age jobs a month - these jobs are gone forever!) and let's start creating the skills that will fuel future jobs. Skill creation is a much longer process than job creation (or job protection!) but the only one that will bring lasting social and economic benefits. From SA's current position of last in the World Competitiveness Report - in terms of use of our people resources - this will be some challenge!

We'll have to fast track people to become economically relevant. Give South Africa's people a basic context in which they can grow - they need to:

Be literate. You can't grow the economy by 6% p.a. with a 46% illiteracy rate (Project Literacy advertisement). You also don't need everyone to have a matric. Let's focus on the immediately relevant skills. Basic literacy plus entrepreneurial skills can create economic sparks!

Speak English. Apart from the people who speak English as their first language, already more than 1 billion people world-wide speak English as a second language. The language war has been won - let's focus on ONE language for South Africa - let's get on the economic fast track.

Get wired. Let's drive for universal Internet access in schools, libraries and public places. The concept of public Internet terminals is fine but far too slow. We already have a great telecommunications infrastructure, now let's open it up for everyone. Get every corporation in South Africa to make their infrastructure available for this purpose, even if only after hours!

Let's invest radically in education - pay teachers amazing salaries. I should want to become a teacher for the money, rather than choose to be a business executive! That's the way to attract the best teachers into the profession. Isn't that what we all want for our children?

Remove central (government) control of the education system! You can't have centralised development of skills in a decentralised economy. By all means let government allocate a portion of its tax revenues to education - just don't give it directly to schools! Let government give 'education vouchers' to parents, so that they can 'spend' them at a school of their choice. Let's create market forces in schools - only those schools that guarantee employment/jobs/work will survive! Wouldn't you send your child to a school that guaranteed a job on graduation? Companies like Van Zyl and Pritchard have been doing that in the IT industry for years! Create the kind of skills that have relevance in the new economy. Create community fever for the new skills/jobs - it's really OK to be self-employed, it's OK to work in a service industry like tourism, it's OK to be a web designer/programmer vs a doctor or lawyer - these are the new professions!

Create the telecommunications infrastructure for the information economy!: De-regulate the telecommunications industry now! The decision to partially privatise Telkom was made in an environment before de-regulation and before the Internet. Market conditions have changed fundamentally - let's not try to make these old decisions stick at all costs. Let's put South Africa first. Privatisation won't cut it - we're in the process of creating a more efficient monopoly - we must de-regulate the South African telecommunications market. In Germany, de-regulation in telecommunications has created 102 000 new jobs in the past two years! It's the same wherever you look. Let real competition into South Africa, in all sectors of the telecommunications market, to create real growth and real new jobs. How about 50 000 new jobs a year from this decision alone!? If necessary give back the money to SBC and Malaysia Telecom to accelerate the process! You'll make back the money in 18 months!

Once you've de-regulated the market, then break up Telkom into two companies - one focused on infrastructure and the other focused on services. Let everyone have unlimited access to the infrastructure. Telkom doesn't own it, the people of South Africa do! Let M-Net/Multichoice (or anyone else) deliver video-on-demand over the copper cable infrastructure! (While you're about it why not break up Spoornet the same way - into 'Infrastructure' and 'Services'!?)

Incent investment in 'The Right Stuff'! Stop providing tax and other incentives for the acquisition of Industrial Age capital goods (e.g. cars) and focus instead on Information Age 'stuff' that will build skills and can create economic advantage! There should, for example, be no VAT on computers, software, communication charges and Internet access! There should be direct personal tax incentives for the acquisition of such Information Age goods, services and infrastructure.

Attract global skills to South Africa! Create an environment in which they will want to work. The world's best skills are attracted to the world's most exciting projects. Apart from the obvious (a crime-free, gun-free environment etc.) you need low taxes and the world's leading companies investing here. Point 9 below ought to help!

Get rid of income tax! Any business based on services, intellectual capital and ideas (rather than the trade in physical goods) is already able to move royalties, revenues and profits seamlessly around the world - much of it slipping through the traditional income tax net! Today, it is sometimes difficult to tell whether someone is actually 'working' or not! As service and information work increases to more than 50% of GDP (OECD figures are now already over 70%), income tax becomes increasingly difficult and expensive to collect. Let's get rid of income tax and replace it with a consumption tax (a super-VAT). VAT has already proven to be far cheaper to collect than income tax. Let's do it now and take the ceiling off wealth creation and job creation!

Create an inspirational economic policy! This must be an economic policy that every businessman in the world can explain and understand. In terms of economic strategy, let's be a little crazy - but not stupid! Capture the imagination of the world's investors and investment analysts. Be different, be noticed! Let's be the place to invest and work! Let's be the best at attracting the new Information Age businesses, new jobs and new skills.

Right, Thabo, when you've done this you can get back to winning the next election - or perhaps put your feet up after a job well done!

Wolfgang Grulke is CEO of FutureWorld, a global business and technology think tank. He advises major global corporations and small entrepreneurial firms, and is an investor and director in several such companies.

Copyright FutureWorld 1999 All Rights Reserved