B4SA identifies initiatives that could grow GDP by R1trn

Group says recovery is certain but government with business would have to take the high road to improve SA’s prospects.
The country's GDP could double over the next ten years. Image: Guillem Sartorio, Bloomberg

Business for South Africa (B4SA) has identified 12 key initiatives that will accelerate the country’s economic recovery and could grow its gross domestic product by R1 trillion, generate 1.5 million jobs and increase tax revenues by R100 billion per year. 

The group which was established to coordinate business’s response to the Covid-19 pandemic, released its economic recovery strategy plan dubbed ‘A New Inclusive Economic Future for South Africa‘ on Friday morning. 

B4SA, which expects the economy to decline by between 8% and 10% this year, forecasts the budget deficit to increase to 13% of GDP and, without structural reform, sees the budget deficit remaining above 13% while debt is expected to exceed 100% of GDP by 2023. 

A fork in the road

“The nation has arrived at a fork in the road,” B4SA believes.

“Protecting the status quo with only marginal change locks in an accelerated downward trend, while a committed leadership willing to make difficult, though sometimes unpalatable choices focussed on appropriate policies, which enable investment and thus inclusive growth, can decisively improve the economic and social trajectory of the country,” it said. 

B4SA outlined paths that the country could take, namely the ‘low road’ and ‘high road’. 

Low or high road?

In the low road, the country would reverse the gains made since the dawn of democracy 26 years ago, where “absent decisive leadership and action” will result in a trap of flat or negative growth, escalating government indebtedness and unemployment. 

“Government’s ability to fund the deficit will be further curtailed and the attendant consequences of increasing poverty, rising crime rates, and declining health and education levels could lead to widespread societal instability,” it said.

“On the other side of the coin should the country choose the route of the high road through a combination of decisive leadership and bold action” underpinned by an evidence-based and rational approach, the economy would grow by 5% per annum. 

The country’s GDP would double over the next ten years and “materially reducing unemployment, inequality and poverty in the process.

The document comes as a result of two months of work between business and government and various sectors and community groups. 

The 12 key initiatives, some of which can be launched immediately, include secure and affordable electricity supply, fast-tracking green economy, implementing Transnet’s road to rail strategy, ports expansion, road infrastructure, the utilisation of full-spectrum,  e-learning & digital health platforms, e-commerce acceleration, water infrastructure, maximise commercial agricultural output, import replacement focus, increased financial inclusion and lower cost of capital. 

R3.4 billion ticket

B4SA estimates that the plan will cost R3.4 trillion over the next three years, outlined as a budget deficit and state-owned entity shortfall of R2.4 trillion and private sector funding requirement of around R1 trillion.

“This estimate does not account for potential rescue funds for large corporates or an unforeseen worsening financial situation at SOEs.”

In light of this, public debt will increase from R4 trillion to more than R6.4 trillion over the next three years, said B4SA. 

“This funding cannot be met by domestic sources nor is it possible for the South African Reserve Bank (Sarb) to address the shortfall in a responsible and sustainable manner through monetary manners.”

Government is not expected to shoulder this burden alone. 

B4SA said the private sector could fund the development of infrastructure in an enabling environment, resulting in the public sector commitment reducing to R1.9 trillion over three years. In so doing the budget deficit will normalise to 3.5% by 2025. 

At the same time, the country would need to mobilise international funding, with B4SA saying more than $10 trillion is available from sovereign wealth funds, development finance institutions and alternative asset managers, outside traditional global emerging market debt and equity investors. 

“However, most of these alternative sources of foreign capital are not focused on emerging markets and will only consider South Africa if we provide a more compelling investment case,” said B4SA. 

An equal number of policy enablers will be required to action the plan successfully. These include tackling crime and corruption, improving ease of doing business, mobilising large scale infrastructure project, SOE reform, getting clarity on land reform, education and skills development, reviewing trade policies, labour law reform, simplifying mining investment regulation, aligning national energy strategy across all key plans,  maximising telecoms connectivity, financial inclusion and fiscal support. 

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“At the same time, the country would need to mobilise international funding, with B4SA saying more than $10 trillion is available from sovereign wealth funds, development finance institutions and alternative asset managers, outside traditional global emerging market debt and equity investors.”

It really doesn’t matter how much capital is available if, when it gets here it gets either stolen, misspent or just incompetently wasted.

What B4SA should do is suggest that the government resigns and allows business professionals with proven track records in commerce to take over the running of the country. The ministers can continue to get paid with all their perks: just stay at home.

It will be far cheaper …

Talk talk talk and more talk..

How can there be a solution when the very people who must instill initiatives are the problem..The solution is a change of Government..The ANC are modern day thieves

When officials steal UIF money destined for those who desperately need it, when the SG who himself is Mr head looter wants to re instate the VBS robbers back to their jobs, when the Zondo Commission does nothing but request more money, then R1 trillion and 1,5 million new jobs sounds like a Politician on expired cannabis

The entire cabal is a circus and we pay dearly to watch the show

Positive ideas, Is there enough political will to support and see these through.

If all those initiatives involved BEE 51% ownership companies with some cadres involved. Than maybe.

I think you should rephrase that to: “Is there enough political intelligence …” and the answer is? No …

Among the 12 mentioned key initiatives there are two which impact negatively on the wellbeing and general morale in the country. South Africa should,if this is the last thing we do for the masses, decommercialize the domestic consumption of both electricity and potable water. Business and organizational institutions should be the ones that are billed for such services. A 2 to 3 percent increased VAT charged can more than carry those costs on a national basis. VAT is managed by treasury and corruption at that level is minimal if not non-existent.

Reduce size and wages of public service. Reinstate Public Services Commission. Return state departments to apolitical, career-oriented, professional service.
Cut taxes. No export tariffs. Import tariffs only on products from countries that employ state subsidies and which compete with SA industries.
Auction spectrum.
Introduce mandatory retirement savings instead of more personal income tax.
Use a tax threshold to help lower incomes but no progressive taxation nonsense.
Abolish foreign exchange.
Pay down the national debt. Introduce hard debt brake– 60% of gdp abovr which govt cannot borrow new money. Also hard brake of minus 2 percent budget deficit only.
Boot political party list deployees out of municipal councils.
Direct election of mayors, premiers and president.

No more bloody baby-making doles.
Deregulate electricity. Let munis and industry produce their own and buy directly from providers. Transmission companies take a fee from providers similar to fibre set-up.

Allow sugarcane to reposition towards ethanol production (fuels but also as petroleum replacement for other products)
Legalize tobacco.
Fix the damn sewage works and offer licenses for desalination plants (oh yes we will need water someday).
No more NHI.
Get politics out of business and sports and arts&cultures. No more politicians sitting on judicial selection committees.
Hold trade unions accountable when they burn and loot.
Cut funding to all traditional leaders. Do away with traditional courts. Abolish communal land trusts and give people their own title deeds.
Above all, the right to own property is the cornerstone of prosperity.
Without that, we will always be hostages in our own country and govt will claim the fruit of our labor.
Get rid of BEE, employment equity, affirmative action.

These are the only reforms i can see that will make a difference. Everything else is just window dressing.

We do not want foreign debt. A saving grace in RSA is that 80% of the debt is in ZAR. Sho the exchange rate is largely irrelevant.

We need to get business who are sitting on R5trn in cash to invest it.

Get rid of the red tape and complex rules. Business have already indicated with all their requests for 100 MW here and 50 MW there that they will gladly spend R200 to R300bn on renewable private electricity

Finally someone has the correct figures.
Costs of creating a single job requires investment of R420,000 to R680,000.
Taking the R1tril investment and dividing it by the 1,5mil jobs means that they have prices each job at upper end of the scale R666,666 per job.

Officially South Africa has 17,000,000 unemployed meaning we would need investment of R8,500,000,000,000 (R8,5Tril).

Is it possible? Yes
Will it happen? No

Job creation is extremely expensive, when viewed from a 2nd world perspective.

However, we live in a 70% third world country. Informal sector jobs cost a fraction of the 2nd world, formal sector jobs. Much bigger focus should be on the informal sector.

Also, curbing population growth costs a fraction when compared to job creation.

Cart before horse. Only the last paragraph is vaguely relevant and then just pie in the sky based on real today performance. Stop trying to pretend the “emperor”, the ANC regime, has clothes.

End of comments.

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