#8 Winter 2017

Leadership in turbulent times

Nhlanhla Nene chats with Rayner Canning, Business Development Director at the GSB, at the launch of GSB Johannesburg in May where Nene was the keynote speaker. The venue, at 61 Katherine Street in Sandton, will be used primarily to deliver customised executive programmes and short courses to the GSB’s corporate and government clients. It will also host various Distinguished Speaker Programmes, recruitment events, careers service events and alumni events. The venue is one of two satellite sites established by the GSB in recent months to ensure that its offerings and expertise are more accessible to key stakeholders. The other site is located in the community of Philippi in Cape Town.

Developing and implementing public policy is difficult even at the best of times. And currently, the circumstances prevailing in South Africa are far from the best. That’s when good leadership matters more than ever.

We are living in turbulent times. Our economy is moving at a snail’s pace – for some it may feel like it’s not moving at all. And then there’s the political drama that grabs attention much more than any of the soapies currently on our TV screens.

But as Warren Buffet puts it: ‘only when the tide goes out do you discover who’s been swimming naked’

Turbulent times call for a special quality of leaders. Above all else, they call for steady nerves. They call for leaders who can lift their gaze above the fog of today, but also make their followers believe that tomorrow, and the many days after, will be better than today.

Even under the best of circumstances achieving sustained economic growth and development is difficult. It takes a lot of discipline and focus by policymakers and a country’s political leadership.

But as we all know, one never has the best of circumstances, at least not all of the time. So, achieving sustained economic growth and development is even more difficult. To achieve sustained growth and development, or even to manage to keep a country’s head above the economic waters, there must be a few basic things in place.

They are, in no particular order of importance:
Sound economic and social policies.
Effective and efficient public administration; and
Good political leadership.

Absent good political leadership, there will be no sound economic and social policies. As we know, bad leaders focus not on the long-term development of their societies, but on themselves, their immediate families and cronies. But even if a country has sound economic and social policies in place, they won’t be implemented without effective and efficient public administration. Weak public administration is also a function of poor leadership.

The Commission on Growth and Development which st

udied countries that had sustained high levels of economic growth over long periods of time concluded that these countries shared “an increasingly capable, credible, and committed government”.

Growth at a fast pace and growth that is sustained over long periods of time

happens because of strong political leadership. Such growth requires of leaders to: choose a growth strategy; communicate their goals to the public, and; convince people that the future rewards are worth the effort, thrift, and economic upheaval.

Leaders can only succeed if their promises are credible and inclusive, if they can reassure people that they will enjoy a share of the benefits of economic growth, or at the very least that their children will have a better life.

Such promises can only be believable if policies are being implemented by an effective public administration. As the saying goes: ‘You can fool all of the people some of the time, but not all of the people all of the time.’

As the Growth Commission reminded us, building an effective government machinery takes time. It’s a task that requires constant attention. This requires that the public administration be structured and run in a manner that attracts and retains talented people. This can be done by, among other things, paying better salaries based on performance and promoting people based on a performance criteria and not political patronage.

But as we know from our most recent experiences, an effective public servant is as, if not more, dangerous than a public servant who knows not what he or she is doing. So, a culture of honest public service must be fostered and maintained.

The integrity of the state machinery matters a great deal. Corruption is not only a tax on economic growth, it is theft of the futures of the most vulnerable in our society. Corruption deprives the poor of their only access to the means of survival. Without good governance and economic growth, a country is deprived of its means to lift more and more of its people out of poverty.

As laid out in the book To Serve and to Preserve: Improving Public Administration in a Competitive World, Asian Development Bank, we can only build good governance on four pillars: Accountability; Transparency; Predictability; and Participation.

But to come back to the crux of the topic, developing and implementing public policy is difficult even at the best of times. And currently, the circumstances prevailing in South Africa, aren’t the best of circumstances. This is largely due to our own domestic factors, whilst the global economic environment isn’t helping either.

Economic management, for example, is an art, not a science. It is an art which is often practised in unprepossessing circumstances because information, the raw material of the art, is unreliable.
As the late Edmund Dell pointed out in his study of the chancellors of the exchequers: “Economic theory provides no comfort, only controversy, and may be a distraction. Scepticism is to be encouraged but, on the other hand, is not in itself creative.

“Politics is an inevitable presence with its demanding questions and its partisan answers too often pressing the Chancellor against his better judgement, or at least that of the Treasury. At the centre of political attention, he will be subject to a spate of criticism from many people, all of whom will consider themselves better equipped to define policy than he.”

Dell adds that there are no secure stepping-stones to a more prosperous future – all are at least slippery, some are merely mirages. In the absence of anything better, the Chancellor of the Exchequer may watch the market, which, though “self-opinionated, short-sighted, often passionate rather than rational”, may nevertheless provide their best anchor.

A Chancellor’s essential judgement, according to Dell, should be whether his policy is robust against the market and robust against errors in economic forecasting. Whatever a he or she does, he should not claim more for his policies than seems optimal in the circumstances as he understands them.

The art of economic policy management has to be practised in an environment of great uncertainty.

The Governor of the Reserve Bank of New Zealand explains the uncertainty in which central banks decide on interest rates, in particular. “Central banks do not have special powers of market foresight or a franchise on wisdom. But they do have significant research and analytical capacity that can deliver valuable insights, and this is being applied to challenges associated with the current global economic and financial developments. It means that central banks are in a position to modify their perspectives and policies as new analysis and data becomes available.”
He concludes that in the end, judgement is inevitably involved in balancing a range of risks and uncertainties. Some of the risks and uncertainties lie beyond the influence of a central bank. Others can be addressed through monetary policy. Inevitably, decisions involve reflection and pragmatism in managing different trade-offs.

Finance Ministers face similar challenges. Their task is made much more complex today by the fact that they have to manage in a time of socio-economic and political turbulence.

South Africa has had to, and I am sure will continue to, manage its economic affairs in a global environment of uncertainty, both economic and political. This is primarily because South Africa cannot delink from the global economy. It is a very small economy by global standards and therefore depends for its sustenance and prosperity on the umbilical cords it has with the global economy. We sell goods and services to the rest of the world.

Our umbilical chord to the globe is a conduit not only of nutrients that sustain our economy, it is also a transporter of shocks and risks emanating from elsewhere. These shocks, such as the 2008 global financial crisis, which started in the US sub-prime housing market, make economic management that much more of a challenge.

Former UN secretary-general captured the globalisation dilemma rather well: “Historians may well look back on the first years of the 21st century as a decisive moment in the human story. The different societies that make up the human family are today interconnected as never before. They face threats that no nation can hope to master by acting alone – and opportunities that can be much more hopefully exploited if all nations work together.”

For decades to come, South African policy makers will have to manage our economy in such a manner that our economy and society reap maximum benefits from our links but at the same time strengthen the country’s ability to withstand shocks emanating from elsewhere in the world.

There is another complicating factor. And it is the fact that the people on whose behalf public policy is made and implemented judge policies not on the basis of science, evidence and principle. As a policymaker you can develop and implement all manner of public policy that your balance of evidence and science tells you will in the long run be in the interest of all citizens.

Citizens, however, will most often base their judgments of your policies upon the meaning of the policy as they see it, not in terms of some kind of propositionally rigorous analysis, such as a demonstrated causal relationship among variables or a deduction from first principles. As Richard D. French writes in a blog for the London School of Economics, often policies are judged when they are announced, not after implementation has generated any evidence, for or against.

In conclusion, public policy development and implementation is challenging. In some ways, it is no different from what private sector economic institutions face daily. But in many other ways, public policy management is that much more complex. What makes life relatively much easier for private sector firms is that they have one objective, which is to turn a profit. Private sector firms that fail to turn a profit disappear, or are taken over by their more successful competitors. Public sector institutions have multiple objectives, and often these are in conflict with one another. Policies that benefit one segment of society, create losers in another sector. Often, public sector institutions are immune to being disciplined by the public they are meant to serve.
A further complicating factor is that the poorest of the poor are most often the ones most dependent on public services. Yet, the voice of the poor is often not heard in the corridors of power and public service. Those in the middle and upper income earners, have the means with which to buy whatever public services they want from the private sector: security, education and health care.
In short, public policy making and implementation is complex. Policy makers have no special powers to see into the future, yet they must make policies that take years, if not decades, to implement and deliver the desired results. In the end, all they have to balance the risks and uncertainties about the future is good judgment. On top of all this, public officials must explain the basis of their decisions to the legislatures and the electorates.

All of these factors are difficult to manage in normal times. They are even worse in times of turbulence. That’s when leadership matters the most.

Nhlanhla Nene is Resident Adviser, Thebe Investment Corporation Non-executive Director, Allan Gray Investments. This article is an edited version of a speech delivered at the opening of the Johannesburg campus of the UCT Graduate School of Business.

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