The top young talent in the field of economics are cautiously optimistic about the potential for the South African economy to recover.
This has emerged from essays submitted for the 48th annual Nedbank and Old Mutual Budget Speech Competition, which is open to undergraduates and postgraduates in the field of economics.
The leaders of tomorrow have called on Finance Minister Tito Mboweni to act decisively in his budget speech, imploring the government to take the necessary action to repair the country’s purse.
Their most ardent recommendation: root out corruption by any means necessary.
For the finalists, this is the number one barrier to attracting investment and fostering economic growth. In fact, all entrants cited this as a major obstacle to creating a supportive business environment and securing the stability required to allow for the effective implementation of macroeconomic policies.
Understandable pessimism, but optimism too
Tasked with evaluating President Cyril Ramaphosa’s economic stimulus package, jobs summit initiative and bold $100 billion investment target, participants were understandably pessimistic about the possibility of short- to medium-term gains.
Citing government inefficiency, corruption and the lack of a skilled workforce, all the finalists agreed that these reforms are unlikely to meet their goals unless the problems at the root of the economic turmoil are addressed.
These outstanding young thinkers remind us not to overlook the reasons for optimism in these troubled times.
Most highlighted South Africa’s robust financial services and banking sector as a key asset in attracting investment.
The independence of the South African Reserve Bank and our stable monetary policy were also frequently mentioned as a draw for investors. Indeed, South Africa boasts some of the most sophisticated and sound financial institutions in the world.
On the whole, the finalists see the country’s strong regional, continental and global trade networks – particularly its role as a gateway into emerging African markets – as a key factor in favour of attracting investment.
The views they expressed echo the calls from broader society for decisiveness and action. Hopefully these views are not falling on deaf ears.
Other findings include:
- All students cited high levels of corruption as a barrier to investment, particularly in relation to state-owned enterprises (SOEs).
- The mismanagement and decline of SOEs were also often mentioned as a barrier, in particular Eskom, because of the harm of an unreliable energy supply to industry as well the bailouts putting enormous pressure on the fiscus.
- A threat to property rights and the rule of law as well as political interference with institutions were frequently mentioned as undermining the likelihood for investment. Land reform, mining and reform in SOEs are of particular concern.
- The budget deficit was mentioned as being a deterrent to investment because it makes the country look financially unstable. Government inefficiency and instability were also mentioned as barriers to investment. One entrant argued that poor governance structures create uncertainty around the safety of investments. Political risk and instability were frequently mentioned barriers.
- The high cost of labour and restrictive labour regulations were argued by a number of the students as a barrier to investment. However, one student made the case that high unemployment makes labour relatively inexpensive compared to some other emerging economies.
- The instability in society as a result of inequality and poverty also reduces investor confidence, according to a few students who mentioned crime and theft in particular.
- Other barriers specifically mentioned include the difficulty of doing business, low business confidence, exchange-rate instability, challenges to the rule of law, infrastructural challenges and the low-skilled labour force.
Their ideas aside, every year, these bright young minds remind us that we have a whole new generation of talented and innovative leaders in our country eager to make a difference.
Just listening to the enthusiasm with which they debate opportunities and ideas fills me with hope and optimism for the future.
The results of the competition will be announced later in February.
Farhad Sader is MD of Old Mutual Wealth.