Ramaphosa is boosting mood

Perhaps it’s the change of season, perhaps real signs of change in the economy, but a subtle yet important shift in the narrative from business leaders has become noticeable. A year ago, the talk was dominated by whether Cyril Ramaphosa would be elected as the new ANC president. Few would’ve bet money on him, but most quietly hoped that no Zuma would make it near the presidency again.

Ramaphosa’s against-the-odds victory at Nasrec, therefore, had SA on a confidence sugar high for a good three months before reality kicked in — a decade’s mismanagement could never be undone in a matter of months. The economic data soon started quelling all hope of his promised new dawn, with the economy going into recession for the first time since 2009.

And so talk turned to the big black hole that is the balance sheets of some of our major state-owned enterprises (SOEs), the possibility of further credit ratings downgrades, and despair at whatever explosive testimony witnesses shared at the latest sittings of the Nugent or Zondo commissions.

In the past month or so, however, conversations have been changing. Where the economy was seen as a patient on life support, discussions are increasingly turning to the many possibilities that lie ahead as we slowly get back on our feet.

A large part of the mood shift seems to be due to Ramaphosa’s speech at the investment summit late in October, where he hailed business leaders and entrepreneurs as heroes rather than white monopoly capitalists. His message was clear: business is welcome in SA and the government will work harder to make the environment friendlier.

So rather than despair over the medium-term budget policy statement, delivered in the same week and showing all key indicators going in the wrong direction — lower growth, higher debt to GDP levels, a wider budget deficit, more bailouts for SOEs and a ballooning government wage bill — Ramaphosa’s speech is the one that seems to have made the lasting impression.

At the Discovery Leadership Summit last week, the speeches and discussions of three of SA’s leading entrepreneurs — Discovery’s Adrian Gore, Investec’s Stephen Koseff and African Rainbow Minerals’ Patrice Motsepe — focused largely on ways to get SA’s economy growing again.

Gore and Koseff counted the opportunity cost of the “useless” decade under Jacob Zuma, to use Koseff’s term.

If SA had continued to grow at the rate it was before the global financial crisis in 2008, GDP would be nearly R800bn bigger than it is now, or about 30% larger. If we had kept up with other emerging markets, that number jumps to more than R1-trillion. And with a tax rate of about 27% of GDP, keeping up with the Joneses over the past decade would have helped the government to keep our budget deficit and ballooning debt load in check.

The message from business is clear: to get the economy growing, we need policy certainty to stimulate investment.

Ramaphosa himself reinforced the message to the audience, explaining that the productive sectors of the economy need “a massive increase in investment” for growth to take place at sufficient levels to create jobs and alleviate poverty.

The president also seems to understand the damage to confidence brought by the land expropriation debate, which is seen by many as an attack on broader property rights. He took time to explain the importance of land reform and redress and highlighted that the matter will be dealt with cautiously, fairly and without a “degrading” impact on the economy.

Time will tell, but hailing business leaders as heroes and taking concrete steps to improve the policy environment may prove to be much more successful and lasting than the president’s R450bn economic stimulus plan. As former US treasury secretary Larry Summers famously preached: the cheapest form of stimulus is confidence.

DISCUSSIONS ARE INCREASINGLY TURNING TO THE MANY POSSIBILITIES THAT LIE AHEAD