Turnaround still possible

RAMAPHOSA: NEEDS TO SEIZE OPPORTUNITY

The government needs to recommit to the four Ps – people, plan, policy and proper implementation.

Disappointing economic growth and a weaker rand have given South Africans a sharp reality check, showing that while Cyril Ramaphosa’s presidency may have initially revitalised South Africa’s sense of optimism, deep-seated structural economic challenges remain.

Ramaphosa’s biggest achievements since winning the ANC elective conference in December have been getting elected as president, placing competent leaders into crucial positions and restoring some confidence in government. However, little has changed. Business and consumer confidence will see a further correction, especially as value-added tax and fuel price increases will leave less money in consumers’ pockets.

Ramaphosa needs to seize the opportunity to get South Africa’s house in order while the global economic environment is still supportive.

South Africa by numbers

The country’s scorecard paints a grim picture, particularly in unemployment, inequality and poverty.

In a population of 57.7 million, the official unemployment rate remains 27.2% – frightening compared with emerging market peers like Brazil at 12.3%, India (3.5%), China (3.9%), and Russia (4.7%).

Of concern is the unemployment rate for 15 to 34-year-olds (53.7%), which means potential for civil unrest and crime.

The World Bank ranks South Africa as one of the world’s most unequal societies – with 50% of the poorest households currently earning only 8% of total household income, while 10% of the wealthiest account for about 55%.

To steer South Africa back on to the path of economic recovery, government needs to recommit to pulling the right levers, or the four Ps – people, plan, policy and proper implementation.

Ramaphosa’s priorities for rest of 2018

We have already seen some progress in the first two Ps. The right people have been placed in the right places – such as respected figures like Nhlanhla Nene, Pravin Gordhan and Gwede Mantashe appointed to key economic positions.

There have also been improvements in state-owned enterprise governance, with changes to the boards of Eskom, Denel, Transnet and SA Airways.

We have the National Development Plan, which charts government’s course for solving economic challenges, and former finance minister Malusi Gigaba’s 14-point plan of action introduced last year to revive the economy.

The real work now needs to be done on delivering policy certainty and stability. While policies need to be approached carefully, the speed and the effectiveness of policy decisions will determine the speed of South Africa’s economic turnaround. Issues that specifically need to be addressed include the Mining Charter, property rights and land expropriation without compensation. We also need to see government encouraging more public and private partnerships.

Once the right policies are in place, we will need to wait for proper implementation. Government must be free of corruption and focused on the task at hand.

If these policies are addressed and properly implemented, we could still see 1% to 2% economic growth next year and, perhaps, even 3% or 4% per annum within the next five to 10 years.

Yolanda Naudé is head of fund research and portfolio manager at Citadel