28 MAY 2015 – 07:09

ELON Musk, perhaps today’s most visionary business leader, has an approach to problem solving — and thinking — beyond the next major pivot that is starkly at odds with how SA is confronting its present and future. The contrast with President Jacob Zuma’s black industrialists project spotlights key differences.

Many South Africans contend that if corruption were snuffed out, the economy would achieve a healthy trajectory. Others among us fixate on redistribution.

Illicit payments and rampant patronage are severe impediments to economic growth. Yet eradicating these problems tomorrow would only slow the pace of economic deterioration, while the funk that the black upliftment project has entered would remain in place. For many decades the country has needed to successfully blend twin economic transformation necessities: broad inclusion and a rebalancing away from resource extraction and domestic consumption towards exporting globally competitive, value-added goods and services.

Musk-like thinkers will see the two goals complementing each other.

Conversely, SA’s politics have led to a cold war between advocates for growth through competing amid greater global integration versus others who strongly favour redistribution with much tolerance for patronage-as-usual politics.

Fixing Eskom is a walk in the park relative to rebalancing the economy away from its excessive reliance on debt-funded local consumption and exporting resources.

By way of encouragement, breaking the world economy’s addictions to fossil fuels and internal combustion-powered vehicles is a grand goal on any scale. Musk’s startling progress reflects not just design and execution excellence; he frames problems in ways that make possible better solutions.

The big car companies were content to put a R100,000 battery in a R200,000 car while hoping to eventually tease out a successful proposition. Musk’s less restrained automotive thinking induced a mischievously elegant car.

He daringly imagined prospects for a R300,000 battery in a R1m luxury performance car. Musk further presumed to challenge business-as-usual at big oil companies and utilities as well as the major car manufacturers and battery producers. All the while he continues to accept the need to collaborate as aggressively as he competes.

Perhaps Musk was influenced by a Russian saying, “in the carriages of the past you can’t go anywhere”. Conversely, Zuma’s notion that SA’s government institutions should fund the conception of black industrialists resembles Russia’s oligarchs.

There is also the pesky matter of how global industrial productivity growth each year exceeds demand growth. It is not quite a battle to be the last man standing. Rather, the industrial era’s influence has peaked and, like the agricultural age before it, will continue to be important — while far less frequently offering upliftment paths.

Today, it is only those industrialists that can elbow past global competitors through valued innovations and improved efficiencies that can stay in the game — let alone, break in from the outside.

Throwing tens of billions of rand at efforts to create several dozen black industrialists will strike overseas observers as something cooked up between presidents Vladimir Putin and Zuma.

ALL the while, funding needs for conventional, probably nuclear power facilities, will challenge the nation’s debt capacity amid concerns of implacable patronage. If SA’s public sector-aligned funders are unable to find private sector lenders to co-invest on precisely the same terms, then presidentially inspired projects, such as the industrialists-creating scheme, should be dramatically scaled down.

Given depleted state coffers and inadequate investments in infrastructure, the likes of the Industrial Development Corporation and the Public Investment Corporation should not be funding politically inspired initiatives if no private investors will invest alongside.

The window for major industrialisation initiatives began to creak shut in the 1970s and 80s while SA’s global integration was set on retraction mode. China’s per capita income has since soared 4,000% with its industrial production gone from an embarrassment to globally number 1 in volume. All the while Moscow has drifted toward the model adopted in the Middle East and Africa during the 1970s: rather than investing in people they chose to rely on resource extraction.

Zuma’s black industrialist plan might be politically well reasoned; yet economically the scheme is not sensible. Such disconnects have become prohibitively expensive. The proposition is inverted: lack of sufficient capital is a problem for SA’s government but not for its new industrialists. To achieve politically important objectives, economic forces must be harnessed; not glibly, and hopelessly, refuted….

THE modest number of industrial jobs that are being created today in the West tend to go to those who have developed exceptional maths skills, particularly trigonometry, while in the East competition is even more severe. This leads to another question: which markets will these new industrialists target?

Eastern and western consumers and business markets have long been hard to crack. Now the latest data from the US suggests a spending trend away from traditional, durable, consumer goods towards softer, life-style options such as phone apps and holidays.

The overused alternative, favourable access to SA’s government affiliated organisations, will only support so many businesses and this approach has proved costly for Eskom, among others.

Targeting Africa is another option but its needs are now served by companies from all corners of the world. The continent has more than 14% of the world’s people yet less than 3% of global gross domestic product — with discretionary income under 1%. Africa is too small a market to support sufficient investments to achieve adequate competitiveness. The global leaders will remain advantaged.

Musk, born in SA, is defining new frontiers and markets by assorting unlikely mixes of technology and ingenuity. This is vastly different from placing primary reliance on lawyers to draft piles of regulations or politicians indulging their constituencies.

SA’s future has been held hostage for generations by its elected leaders refusing to accept the necessity of both local and global integration. The one exception was the boxer-turned-statesmen, Nelson Mandela.

Coupling even small would-be replicas of his humility and wisdom with Musk-like forward-leaning commercial zeal will provoke some jarring missteps. That’s okay. It’s better to take some blows and stagger forward along a promising path than to careen into the future, dashing hopes and diminishing opportunities.

Published in Business Day