Constraints to SA’s economy

President Cyril Ramaphosa started his tenure by appointing new ministers and special investment envoys as part of his pledge to boost an ailing economy.

He also named Oxford University graduate Trudi Makhaya as his economic advisor to help coordinate the work of these special envoys and work on a series of roadshows as he seeks to attract $100 billion in investment into South Africa over five years.

According to Makhaya, these are the main constraints:

Competition

The concentrated nature of the economy, partly due to a high cost of doing business, undermines competitiveness and favours conglomerates.

“We have some great companies, but I don’t think the environment for doing business is all that great,” said the former interim deputy head of the Competition Commission.

Even when foreign companies invest, they normally take a stake in a local operation, rather than starting their own.

Skills deficit

Fixing post-school and technical training could help resolve the mass youth unemployment challenge and help business. The jobless rate for people who finished high school is 28.3%, higher than the national unemployment rate.

“Most companies would achieve far more if they didn’t have to work so hard on the people they got,” she said.

Spatial integration

The legacy of apartheid, which forced black people to live far away from cities’ transport lines and their places of work, adds to costs for the economy.

The country needs to build affordable housing closer to economic activity, she said.

While SA is Africa’s most-industrialised economy, the legacy of apartheid and structural challenges still limit economic growth, according to Makhaya.

“We haven’t really overcome the legacy of apartheid in some ways, we’ve just managed to grow and stretch within those constraints. One of the immediate priorities is to try arrest the decline and to minimise the negative overhang.” – Bloomberg

Moneyweb

Banks are reporting phenomenal growth in the use of banking apps, despite South Africa’s finite banked population, stagnant levels of smart phone penetration and relatively low levels of financial literacy.

Recent figures by leading retail banks show digital banking is growing – understandably, given the fierce competition to innovate and meet digitally savvy consumers’ needs.

FNB’s physical financial transaction volumes declined from 68% in 2009 to 29% in 2018, while digital financial transaction volumes

We have some great companies but ... the environment for doing business is [not] all that great.

Trudi Makhaya President Cyril Ramaphosa’s economic advisor