A Proud Nation

Contributed by: Nick Downing

A Proud Nation

Contributed by: Nick Downing CEO and CIO of Overberg Asset Management

It is a privilege to travel in the Covid age. Although there is the inconvenience of Covid testing before crossing borders, it is well worth the extra delay and discomfort. The nasal swab is not everyone’s idea of a holiday activity. I had to endure four on a recent camping trip through Namibia and Botswana. The first test was retaken and thankfully proved to be a false positive. 

Covid is bad for tourism although some recovery is soon expected, based on the recent gains in BEACH shares (Bookings, Entertainment, Accommodation, Cruises and Hotels). For tourists though, it couldn’t be better, wonderful bargains are available and it means less crowding, if a little bit of peace and quiet is what you’re after. 

As long as you are happy to share your camp with hungry lions and hyenas and don’t mind the occasional elephant tripping over your guy ropes, Botswana is a wonderful country to visit. It is blessed with natural splendour and boasts incredible flora and fauna. Nearly 40% of the country is made up of national parks and wildlife reserves. The sunsets and open skies are unequalled. Yet what struck me most is how the country is at peace with itself. There is no animosity or racism, foreigners are welcomed with open arms. There are no such things as farm murders, violent crime and gender-based violence. Botswana is a law-abiding nation. In a country half the size of South Africa but with a population of just 2 million, one would not imagine social distancing to be an issue and yet everyone wears a mask. There is little litter although it is not as pristine as Namibia. 

The Botswana people are proud. The impression is that they are proud of their achievements and qualities and of the country’s peace and success. The country has been a peaceful democracy since its independence in 1966, the longest surviving democracy on the continent. It is telling how few Botswana immigrants there are in South Africa. The reason is that they enjoy a much higher standard of living at home. The unemployment rate is admittedly quite high at 23% but this is due to the Covid impact on tourism, which plays a big role in the economy. Before Covid, unemployment was 18%. The fiscus is well managed, presumably helped by an absence of corruption. The budget deficit is 3.9% of GDP, and government debt to GDP is only 17.7%. These are remarkable achievements in the context of the Covid pandemic and allow for competitive taxation rates. The corporate tax rate is 22% and the marginal personal income tax rate is 25%. 

The contrasts with South Africa are stark. The unemployment rate and the marginal personal income tax rate are almost double, while the budget deficit and debt to GDP are more than quadruple. But most striking is the lack of harmony. Within 5 hours of crossing the Tlokweng border back into South Africa in the North West province, we came across service delivery protests in the town of Warrenton. Riot police were out en-masse and burnt-out vehicles were still smouldering amid widespread vandalism and other evidence of civil disobedience.

We were reminded upon our return that South Africa is undeniably a wealthier country than Botswana, illustrated by the slick and well cambered roads, the smart game fences, shiny shopping malls and well-appointed One-Stop petrol stations, but in many respects the country is bankrupt.
Unlike its harmonious neighbour, South Africa is not at peace with itself. There is an underlying throb of racism, farmers fear for their lives, and violent crime is a fact of life which with rising unemployment will inevitably become worse. Without an enabling environment for job creation, South Africa’s unemployment rate and its Gini coefficient will deteriorate further. South Africa is a proud nation but there needs to be more evidence of this pride from the ruling elite, not the hubris that has been exposed at the Zondo commission.

The ruling elite needs to live up to the “Proudly South African” maxim. The ANC’s decision that Secretary General Ace Magashule step aside is a good start. Even better would be if politicians generally were able to “step aside” from their interventionist economic policies, which are the death knell of jobs growth. Employment growth would go a long way to restoring the country’s pride. The ruling elite should behave like a pride of lions rather than a pack of hyenas and hunt their own food rather than scavenging off the scraps of others. They need to step aside from their regulations and taxes and give the private sector the incentive and confidence to create jobs.

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*All writers’ opinions are their own and do not constitute investment recommendations or financial advice. Speaking to a qualified wealth and investment professional is crucial before making financial decisions.

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