The McKinsey report released this week is a boon to the optimists and a slap for the naysayers of our economy
Here lies hope. In a week that saw yet another set of indicators facing downwards and South Africa contemplating recessionary times, the McKinsey scenarios released on Tuesday contained silver linings galore. The first such silver lining is Christine Wu, the bubbly pragmatist who was part of the seven-person team that led the six-month research project to assess where South Africa’s growth opportunities may lie.
“I was pleasantly surprised,” she said of the process, and the report that was released this week.
And she was also surprised at how much more upbeat adviser Paul Collier was about South Africa than we locals are. Collier is the co-director of the Centre for the Study of African Economies at Oxford University in the UK.
The report is a 152-page distillation of five areas that the management consultancy believes can add R1 trillion to annual GDP and create 3.4 million new jobs. If you take the long view, South Africa stacks up fairly well: it is the second-largest economy in Africa. Its economy is also bigger than Chile’s and Malaysia’s. We have productivity comparable to China and Brazil. And the business environment is good compared with peer countries.
McKinsey used numerous studies and indicators which reveal South Africa’s business environment is rated better than those of Turkey, Brazil, Indonesia, Kenya, Russia and Nigeria.
“The fundamentals show us South Africa is still a healthy place to do business. Productivity is on a par with China. But before we get excited, it’s worth noting China caught up and passed South Africa in a decade,” said Wu.
Wu’s team spoke to scores of leaders across the private and public sectors, as well as members of key think-tanks and academies.
The firmament of ideas on how to increase South Africa’s economy was exciting – the team had a long list of more than 100 suggestions. The five they recommend are: advanced manufacturing; making infrastructure spending more productive; natural gas to augment power supply; boosting export services to the rest of Africa and building the skills pool.
South Africa can compete well in advanced manufacturing and should niche itself there. A range of medium-sized companies are pioneers ( see list).
How can these companies be boosted? Greater research and development to globalise them. They also need support to develop them as national champions.
HOPEFUL Christine Wu, one of the authors of the McKinsey report