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Searching for economic optimism

We can never recover the lost years but there are signs that economic reality has finally dawned on those leading SA.

There are a few noticeable developments in global affairs these days. The interconnectedness of the world economy, which has seen some countries use economic tools to reaffirm their status and geopolitical authority, the deepening economic globalisation and, curiously, the rise of protectionism by dominant states.

In August the South African economy survived the biggest threat it has faced since the advent of democracy – the Turkish lira’s contagious free fall that spread to emerging markets. This was a reminder that a connected global economy brings with it externalities that, although happening elsewhere, can have significant and far-reaching effects here at home.  

The South African Reserve Bank (Sarb) last month made two interesting public statements. The first is on the future rise in interest, given the global trend, over the next two years. And of course, on the back of continued US Fed rate hikes, a strong US economy that is continuing to outdo its peers while adding jobs.

It led me to wonder whether Reserve Bank governor Lesetja Kganyago and company will follow suit and raise rates in the coming months – a potentially contentious move considering the high level of debt the ordinary citizen is in (some businesses too). What kind of impact would a short-term interest rate hike have on potential borrowers, household debt, the housing market and the cost of servicing existing government debt? I’ll leave the technicalities to those who are more knowledgeable on the matter.

The second, as stated by Sarb, is that “South Africa has had almost no investment growth since 2013”. It is alarming how a country, so full of potential, has had zero investment growth for five years – a period many have come to regard as ‘The Lost Years’ of the Zuma presidency. This will take time to undo, and has reduced the economy to a spattering jalopy in a world where some countries’ economies have managed to be supercharged despite global slowdown and even recession. South Africa’s recovery is critical and must be spurred on by both by government and the private sector.

The fundamental reason for the misfortunes of those lost years is superbly encapsulated in the words of French economist Frédéric Bastiat (1801-1850):

when the immediate consequence is favourable, the later consequences are disastrous”.

South Africa’s economic performance in those five years attests to our leaders’ lack of economic awareness. This resulted in the country falling off the pace. While globalisation binds economies more, it does not wait for countries to get their affairs right, it carries on, moving forward and leaving those struggling behind. It is therefore critical for those directing National Treasury and SA’s monetary policies to remind their political principals of this seemingly obvious fact that is so often ignored. Here at home, the visible hand of politics often overpowers the economic reality, to our detriment.

Now that sense has begun to prevail, it is time look at South Africa with fresh eyes. Such eyes should be focused on three things – (a) we must seek to ensure that South Africa is well-placed and catches up to changes in the world economy, (b) political rhetoric must give way to rationality, and (c) uncertainty must make way for stability.

Finance minister Tito Mboweni must, against the tide of his ANC national executive committee, be bold, hold his ground and repeatedly tell his colleagues the truth they don’t want to hear. Yes, he is correct: the state has no business running SAA and can’t afford to continue to. He is correct that countries are pursuing smarter paths towards their economic advancement and are more focused on their economic rather than political interests.

These factors can influence the extent of capital available for investment in the country, the likes of which we had a preview of at president Cyril Ramphosa’s 2018 Investment Summit. A preoccupation with mining and manufacturing while ignoring other areas like agriculture, and investments in the development of people deprives the country of the ability to diversify its economy and skills. Asian countries are an example of how investing in people can pay off. The latest World Bank Human Capital Index puts four Asian countries in the top five when it comes to human development, whereas South Africa is among the worst performers.

These are some of the main causes of South Africa’s weakness, aided by clumsy political interference in the economy (when public policy panders to political wishes and economic reality). This has resulted in stagnation and delayed recovery. As if politics has ever knocked modern capitalism off its tracks.

I wish governor Kganyago and minister Mboweni steady hands and steadfastness as they try to steady the ship and pay the not-so-hidden costs of years of economic negligence and idiocy. The only way to lift people out of poverty and unemployment is through a growing and working economy – something our political leaders seems to ignore.

The economy needs a champion. It is encouraging to see an administration that has recognised that.

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Mamokgethi….thank you, sadly not the “hymn sheet” the ANC currently sings along too

Perhaps it will eventually be, else you may receive a polite request to add cosmetics to future opinion pieces

The economy does not need a champion. All it needs is to remove, from economic policy, the remnant thinking of the hated tyranny that has in the last century murdered more than 200 million people and counting. People who are economically free, prosper. South Africans labour under the yoke of socialism where people are paid to have babies and not to work. Vast resources are directed towards failed SOE that consume not create wealth as well as an army of mandarins who produce nothing, yet the ANC has failed and failed miserably in areas of education, primary healthcare and security. The ANC is the problem. As such it cannot be the solution. Not now, never.

Colonial government did not make the grade, neither did Apartheid government and it is clear liberation party government did not either.

It is time for a new government, a normal government based on integrity and accountability and leadership with vision – that put the interests of the people before the party.

A government that follows the success recipe of China, Singapore, Japan and Germany – an approach of high economic growth and job creation – and low population growth.

Economic reality has finally dawned on SA leaders ….sadly i dont think so ..Dr.Rob Davies has been our minister of Trade and Industry since 1994 , and therefore has been one of our main economic leaders for the past 23 years . He is a member of the Communist Party central committee in SA , and the Anc to this day ,place their faith in him to plan and grow the SA economy .
His dismal leadership record and outdated cold war economic theories , still impresses Cyril Ramaphosa to this day . The world is not waiting for our leaders to wake up , and is simply moving past us .
The great tragedy is that the Anc leaders continue to remain trapped in a bubble of ignorance , to the detriment of all SA citizens .

Thoughtfully written. However your suggestions does not serve the aims of the ruling elite. They want tax payers and votes. Frankly I sincerely think they don’t really give a damn about a prosperous country (think EWC) if it doesn’t further elevate their position and their pockets. If they did REALLY care then, why only wake up to reality now? Where was their voice of concern, 3, 5 and 10 years ago? What are they the civil servants doing to invest in RSA and her people? I am not talking freebies here, any short sighted politician can do that. What are they the ruling class doing for the people that put them in power? “We overspent/abused/misused and blatantly and brazenly robbed you and the public purse, now you have to pay for it; sucks to be the taxpayer I suppose?” Our president once thought of as pure as the driven snow had to show some fancy footwork relating to R 500 000? This is a self serving bunch so please South Africa do not place your bets on this lot being any different or more honourable than the previous incumbents.

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