Why South Africa needs to go Irish

Ireland is not that big. It doesn’t have that many people. But it is prosperous. And it boasts more than its fair share of talent. 

Standard question for anyone from the Emerald Isle: who is the most famous Irish person you know? 

David McWilliams says, well, the one in the foreword. I was hoping more for Bono, I say. See, I read Money, enjoyed it, but I did not look at that damn foreword.

Because it was with the U2 frontman that McWilliams had the conversation that ultimately led to the book you’ve been spotting in book shops since the festive season. They are old mates; met two decades ago when the economist and writer, who’s also a veteran broadcaster, interviewed the man with the brightly tinted shades. They went for a pint afterwards, and have stayed in touch ever since. 

Gesturing with his phone, McWilliams says: “Sent him a pick of the Madiba statue just now.” 

The interview back then was about cancelling the debt of some of the poorest countries in the world. As a monetary economist, financial instruments and their history have been a passion project of McWilliams’s. He did a stint at the Irish Central Bank before moving to UBS and then BNP. 

And how does South Africa look through that lens? 

“I’ve been here a number of times,” reads the note I scribbled just after the “Acknowledgements” section of his book. The country has never failed to impress and surprise him. There is so much to work with, he says. “Evidently it is not well run,” but that, he adds, is the case in many other countries too. 

His first visit was in 2004. For rugby, of course. “Remember, back when you guys [the Springboks] could still beat Ireland.”  

Obviously, he laughs, until I make a comment about quarterfinals in knock-out competitions … “So the test at Newlands was my first encounter with bakkies, braais, and those tight khaki pants massive men seem to like wearing.” 

I double-check whether he means bakkies or Bakkies (Botha). Both, he confirms. 

“I’ve seen South Africa over 20 years, and it has moral capital that no other nation has. The halo effect is still there, for the rest of the world anyway,” says McWilliams. 

From a Joburg vantage point, or Durban or even Cape Town, we don’t have the impression that we are all that glorious. You get the feeling, instead, that any serious policymaker or investor from Beijing to Berlin and from Dubai to DC increasingly views South Africa as a basket case. As for their eggs, they won’t be putting them in that basket. 

Not so, reckons McWilliams. “You’re still the most important country in Africa, though Nigeria will dispute that, and that is an immensely powerful position.” 

A pity, then, that Pretoria is not managing to leverage that sweet seat at the moment. There is no Otto von Bismarck deftly playing the superpowers and regional bullies off against each other for national gain. And that’s a missed opportunity of note. 

“Obviously there is also the curse of emerging markets here, and you are dogged by many of the same things as, say, Argentina,” he says: large current account deficits, overdependence on commodities exports, an obsession with preventing capital flight, that sort of thing. 

“You need a manufacturing base.” 

Preach! 

It’s the only part of the economy, argues McWilliams, where you can upskill and advance an entire nation. The service industry is not going to do enough. Pointing at the lunch crowd around him, he says: “Restaurants are the same as 30 or 40 years ago, you don’t need new skills or really have new technologies that add value, not like when you have a manufacturing sector that gradually lets you climb up the value chain.” 

The Latin American trap

South Korea once had the same per capita income as Mali, now it’s exporting not only tumble driers and nuclear power plants, but also boybands and bingeable Netflix series. Soft-power … that’s when you know you’ve made it. (And as it turns out, quite a few set-in-Ireland dramas have also made their way around the world.) 

But South Africa is stuck in a Latin American trap. Without a serious manufacturing sector – and there used to be one in the times of affordable and reliable electricity – the pie does not grow enough. “I never see anything made in South Africa on the shelves of a supermarket in Europe,” McWilliams says. 

Well, our oranges are there, but point taken. South Africa does not make and export the right sort of thing. Fruits are useful, but an orange a day won’t keep unemployment away. 

“Then a population explosion is a travesty [or tragedy, I can’t read the note clearly in the white space above a chapter titled ‘Who Controls Money’]; not a dividend.” 

Manufacturing, you see, would vastly help a growing population leap forward. Peronism – the very Argentinian form of socialism and economic nationalism that backfires badly in practice – is the wrong way. And McWilliams says the ANC in government has latched onto Peronism in a big way. The results are there for all to see: cronyism, dysfunction, the rich getting richer, the middle class becoming poor, and the poor even poorer. 

But, South Africa still has so much to work with. More, probably, than Ireland had when it first put the policies in place to become the Celtic Tiger, a growth economy with a very recognisable accent. 

Importing other people’s money

The solution? Go Irish, says the Irishman. Use the right incentives to attract global players. The island nation now has 5-million people, half of them working, and nearly 400,000 are employed by multinationals. Why did these businesses settle in Ireland? Low corporate tax-rates, of course. When Ireland started with a 12.5% tax rate, businesses sat up and took notice. It was almost the sort of rate people formerly had to travel to Caribbean islands for. 

“Populism needs to coexist with capitalism and the only way to do that is to import other people’s money,” he says. “And how? Just don’t tax it.”  Manufacturing will benefit, he adds. And higher paying jobs will find their way to these shores. 

Still, what about the populism part? Usually we know this as grand promises made, accompanied by ham-handed efforts that generally end in unaffordable disasters that leave everyone worse off. Yet the populism McWilliams speaks of sounds more like solid service delivery, properly run state departments, and citizens getting what they pay for. 

Sign us up! 

Not only is the cause not lost here, but we have all the ingredients to lure the big money, says the man who wrote the book on it.