Achieving sustainable economic growth requires time
The Untamed Tale
Tandisizwe Mahlutshana – PPS Asset Management
Several economic indicators in South Africa are in the red, headlined by the record-high fuel price breaching R17 per litre. Many South Africans, particularly in the working class, are asking: “when will this end?” All hopes were pinned on President Cyril Ramaphosa as the man with the plan to boost confidence in our economy, attract investment and create jobs. Instead, 69 000 jobs were lost in the second quarter of the year with many more job losses looming as a number of companies continue to battle with current economic conditions.
Furthermore, business confidence took a marked blow in the wake of widespread corruption as chronicled in the Public Protector’s State Capture Report and has once more retreated from the high levels reached shortly after Ramaphosa’s ascension to the presidency. And just when we thought confidence in the public sector and political stability were looking up, Nhlanhla Nene resigns as finance minister after his jaw-dropping testimony at the Zondo Commission of Inquiry revealed a series of undisclosed meetings with the notorious Gupta family while he was the deputy minister at National Treasury. Following his resignation, former Reserve Bank Governor Tito Mboweni was sworn in as the new finance minister to take over the country’s purse. This takes the number of ministers at the helm of National Treasury to five in just four years. That is hardly a sign of stability in that department and it is probably the one thing needed now more than ever as the country struggles to gain economic growth traction.
Nene’s resignation is probably the first sign of personal accountability within the public sector since 1994. From a governance perspective this is an encouraging precedent. Despite having been out of the public-sector limelight since his tenure at the central bank came to an end in 2009, Mboweni’s gravitas is still fresh in the minds of many. His tenure at the bank has some significant highlights which include the introduction of the inflation targeting policy and bringing interest rates down from double-digit levels to settle well in the mid to single digit range. He is also among the trio of TM’s hailed for managing and growing the economy in excess of 6% per annum, made up of former president Thabo Mbeki, former finance minister Trevor Manuel and Tito Mboweni as the governor of the central bank.
Judging by the market’s positive reaction following Mboweni’s appointment mere weeks before the Medium- Term Budget Policy Statement we can be encouraged by Ramaphosa’s commitment to appointing quality leaders into key government positions. With a number of many other credible appointments we’ve seen this year, Mboweni’s appointment is another encouraging sign that we are heading in the right direction. Resourcing the public sector with quality leaders is an important step towards restoring confidence in it and ultimately getting it to perform for the benefit of the electorate. This will take time, just as it takes time to turn a company around. Apple took almost two decades to turn the corner after its innovation prowess, popularity and sales kept on experiencing a nosedive in the mid-late nineties.
Now consider that it took the US about a decade to get its unemployment rate back to global financial pre-crisis levels with a multitude of interventions which included policy reforms to normalise credit conditions and to resume sustainable growth along with an economic stimulus package to the tune of $1.3 trillion. It’s clear that in order to achieve sustainable economic growth, a gradual and long-term focussed progression can be expected. Considering the amount of debt in our country, failing state-owned enterprises and a struggling mining sector there is a lot that needs ‘fixing’ before we will start to see the fruits from our reforms and see our economy achieve solid growth rates. What’s more is that this needs a significant financial committment.
Thankfully, some headway has been made. At least 35% of Ramaphosa’s audacious foreign direct investment target of $100 billion over the next 5 years can already be ticked off, thanks to, among others, China, Saudi Arabia and the United Arab Emirates. While it may seem as if our country is plummeting further and further, there is quite a bit happening behind the scenes to arrest this downfall and get South Africa back on the growth trail. If it is a sustainable growth trajectory that we want, rather than a boom-and-bust story, we have to exercise some patience.