Let’s make use of the positive sentiment
WHAT A DIFFERENCE a year – and the choice of leaders – makes in the life of a nation! This time last year, our country was on the brink of another self-inflicted disaster: a series of credit rating downgrades, policy uncertainty and our economy slipping into a recession.
Having presented a good Budget, Pravin Gordhan, then finance minister, was weeks away from losing his job, 18 months into his second stint as finance minister. Together with his deputy, Mcebisi Jonas, he was about to undertake a crucial post-Budget investor roadshow with business and labour leaders to try and pull our economy back from the brink. Then the unthinkable happened: having been called home via an SMS, he and Jonas were summarily sacked late on the evening of March 31, 2017.
We’ve come full circle. Gordhan is back in the cabinet as a worthy addition to the economic cluster as public enterprises minister and, importantly, Nhlanhla Nene, who was fired on December 9, 2015, is back as political head of the National Treasury.
Ironically, as you read this, Nene is leading a SA delegation of business, labour and government leaders on an international post-Budget roadshow to convince the investment community, including rating agencies, that last year was our proverbial hour before dawn – the darkest – and that a new dawn is now upon us. Our country deserves a benefit of doubt.
In the short space of a mere three months, we have made considerable progress that requires acknowledgement. On the political front, we’ve had a constitutional political leadership transition, a broadly credible cabinet reshuffle and a difficult but credible Budget.
Unsurprisingly, our country is experiencing an unusual bout of positive sentiment. Parliament is functional again and doing its work instead of focusing on diversionary theatrics, and Eskom has a new board of competent and credible South Africans who are have been given the task of stabilising the company’s finances, and addressing its serious leadership and governance crises. All the problematic executives have left the employ of the company, allowing the new board to appoint a credible chief executive and chief financial officer.
At Denel the controversial chairperson has stepped down, paving the way for the appointment of a competent individual to lead the rejuvenation of the board.
In due course, President Cyril Ramaphosa will announce terms and references of a judicial commission of inquiry to look into the governance and tax administration concerns at the SA Revenue Service, a move that should see the credibility of Sars being restored, especially at a critical time when personal and corporate taxes are being raised in our country.
Last week, Deputy Chief Justice Raymond Zondo named the team that will assist him in investigating serious allegations of state capture. We expect that the government will adequately fund the commission, as directed by the North Gauteng High Court when it upheld the remedies of the former public protector.
Quite correctly, Ramaphosa has placed the economy, especially inclusive growth and transformation, at the centre of his administration’s agenda.
As part of the new dawn, the disastrous mining charter has been taken off the table, and parties have been asked to give negotiations another chance.
With Mosebenzi Zwane, the former mining resources minister, now a backbencher alongside nine other compromised colleagues, his successor, Gwede Mantashe, has an opportunity to negotiate a progressive, but workable, charter that will position this still-important industry to take advantage of the improving global commodity cycle.
The era of policy flip-flops appears to be making way for clear, consistent policy and regulatory framework – a key ingredient to attracting long-range direct investment.
The positive sentiment is reverberating across the rest of the economy. Our currency, a barometer of sentiment, has responded positively.
The seasonally adjusted manufacturing Purchasing Managers’ Index (PMI) compiled by the Bureau for Economic Research and sponsored by Absa, as well as the private sector PMI compiled by Markit and sponsored by Standard Bank, both showed a move above the 50-point break-even level last month in reaction to the recent positive events on the political front.
The Absa PMI moved above 50 points, or positive territory, for the first time since May 2017. The index rose to 50.8 index points from 49.9 points in January. The rise in the PMI was driven by solid improvements in the business activity and new sales orders.
The most encouraging reading from the February PMI survey was the index tracking expected business conditions in six months’ time, which jumped to the highest level since 2001.
Add to these readings the news that, in the last quarter of last year, GDP growth came in at a higher-than-expected 3.1 percent is cause for more optimism, and if sustained into the new year, there is no reason for the growth forecast not to be revised upwards.
The challenge now is to attain and sustain economic growth through deliberate and focused action by the government, business and labour to reduce the costs of doing business, improve efficiency and productivity across value chains and remove policy uncertainty in many areas of the economy. Also we need to ensure the current positive sentiment is sustained.
Simply praying for good rains is not enough; we have to take our destiny into our own hands and seize the opportunity presented by favourable global economic conditions as well as the positive sentiments prevailing in our country.
While much has been done, more has yet to be done for our country to be considered an investment grade destination. Among others, we need to assure – in words and deeds – that the proposed constitutional amendment to address the emotive but critical issue of land will not result in smash and grabs or undermine food security and the rule of law.
In business, the new administration has a willing, capable partner to help make our country an attractive investment destination free of state capture, corruption and policy uncertainty.
Bonang Mohale is the chief executive of Business Leadership South Africa (BLSA).